3
The Lessons of History

The Economic Research Service (ERS) and its predecessor, the Bureau of Agricultural Economics (BAE), have performed in a variety of roles over the three-quarters of a century since the BAE was established in 1922. Much can be learned from this long experience about the limitations and the imperatives facing a government agency responsible for research, secondary data development, and various types of analysis.

The reporting structure and organizational environment of ERS and the BAE have changed greatly over time, with substantial implications for the role, political limitations, and expected performance of a research, information, and analysis agency and for its internal culture, level of professionalism, and quality of product. It is also the case that, over the past 75 years, the nature of the food system, and consequently the U.S. Department of Agriculture (USDA) political and policy agenda, have changed drastically. These changes have created a progression of rather different challenges for the provision objective information, research, and analysis, which suggest some of the specific goals, strategies, and behaviors important to such ail agency's success. This chapter examines the experience of the BAE and ERS in order to extract the lessons history provides, for a primarily economics-based federal agency producing research, information, and analysis.

Economic Intelligence and Research in USDA

Although some agricultural data have been collected by the government (the Patent Office) since the 1840s, the Department of Agriculture, which was founded in 1862, created a Division of Statistics in 1863 to take over this responsibility.



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3 The Lessons of History The Economic Research Service (ERS) and its predecessor, the Bureau of Agricultural Economics (BAE), have performed in a variety of roles over the three-quarters of a century since the BAE was established in 1922. Much can be learned from this long experience about the limitations and the imperatives facing a government agency responsible for research, secondary data development, and various types of analysis. The reporting structure and organizational environment of ERS and the BAE have changed greatly over time, with substantial implications for the role, political limitations, and expected performance of a research, information, and analysis agency and for its internal culture, level of professionalism, and quality of product. It is also the case that, over the past 75 years, the nature of the food system, and consequently the U.S. Department of Agriculture (USDA) political and policy agenda, have changed drastically. These changes have created a progression of rather different challenges for the provision objective information, research, and analysis, which suggest some of the specific goals, strategies, and behaviors important to such ail agency's success. This chapter examines the experience of the BAE and ERS in order to extract the lessons history provides, for a primarily economics-based federal agency producing research, information, and analysis. Economic Intelligence and Research in USDA Although some agricultural data have been collected by the government (the Patent Office) since the 1840s, the Department of Agriculture, which was founded in 1862, created a Division of Statistics in 1863 to take over this responsibility.

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USDA received its first appropriation specifically for collecting agricultural statistics in 1866 (Duncan and Shelton, 1978:6; Tenny, 1947:1018). Since that time, regular monthly reports have been produced on conditions of crops and numbers of livestock on farms. The purpose of this public intelligence was to improve the equity and efficiency of local commodity markets and to warn of disease, droughts, and other local farm problems. In the nineteenth century, this became a progressively larger challenge due to the ever-growing expanse and biodiversity of farming, as the U.S. frontier marched across a continent. Better-informed decisions by the millions of farmers and thousands of agricultural market firms were the immediate objective. Public policy in agriculture—and thus the mission of USDA—was originally limited to gathering and disseminating market intelligence and to natural science research and education designed to improve agricultural productivity and defend it against disease and pests. Throughout the nineteenth century, USDA was primarily a statistics, research, and education organization. Its likeness to a university was often remarked upon (Gaus and Wolcott, 1940:16; Wilson, 1912). Regulation of agricultural markets also began in the late 19th century—primarily for animal health and food safety purposes and to establish common standards for weights and measures. Direct public policy intervention in markets to affect farm prices and incomes, i.e., the farm programs, did not occur until the farm crisis of the 1920s and the Great Depression of the 1930s. Social science, primarily economic research, began to develop as part of the USDA's mission only in the first decade of the twentieth century (Baker et al., 1963). The first formal organization for data collection in USDA started with the establishment of the Division of Statistics in 1863, one year after creation of the Department of Agriculture itself. Agricultural products constituted well over half, and in some periods more than 80 percent, of all U.S. exports during the nineteenth century (Cochrane, 1993:150, 267–270; Economic Research Service, 1977). By 1902, a Division of Foreign Markets had been established to develop data on world agricultural markets (Baker et al., 1963:517). In 1903, the Foreign Markets Division was merged with the Division of Statistics to form a Bureau of Statistics. In 1914, the Bureau of Statistics was renamed the Bureau of Crop Estimates, and in 1921 it was merged with the Bureau of Markets to form a Bureau of Markets and Crop Estimates (Baker et al., 1963:80, 516–517). This merger brought together, in one organization, responsibility for the collection of farm-level crop and livestock data with that for major domestic and foreign commodity market transactions. At the same time, economic research was slowly being developed in USDA and focused on the problems and decision needs in farming. The Office of Farm Management had first been formed in 1903 in the Bureau of Plant Industry, but it was transferred to the Office of the Secretary in 1915 (for economic and program analytic support during World War I). Its title changed to the Office of Farm Management and Farm Economics in 1919, and then in 1920 it was moved out of

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the secretary's office to separate USDA agency status (Baker et al., 1963:107–108, 498–501). Finally, in 1922, the data collection function of the Bureau of Markets and Crop Estimates was combined with the economic analytic and research capacity of the Office of Farm Management and Farm Economics to form the Bureau of Agricultural Economics. Most BAE economists were recruited from a few land grant colleges of agriculture with Ph.D. programs. Even as late as 1930, the vast majority of U.S. agricultural economists were being trained at only three universities: the University of Wisconsin, the University of Minnesota, and Cornell University (American Farm Economics Association, 1930). As farm production became less and less a matter of subsistence during the nineteenth and early twentieth centuries and more a monetized market transaction, the dependence of millions of farmers and market firms on USDA for market information grew apace. Over this period, farm markets expanded from primarily local or regional to national and, for some commodities, even to international in scope. At the same time, the nature and scope of the demand for market intelligence, economic research, and analysis also expanded. Periodic recessions and banking ''panics" led to disordered farm markets and major declines in farm prices and welfare during the nineteenth century, periodically demonstrating the importance to the efficiency of farm markets of broad public access to more complete and accurate market intelligence. By the turn of the century, concern for the welfare of farmers, most of whom were quite poor, led to research to understand and deal with the now-chronic economic problems of an industrializing agricultural sector that exhibited immense and repeated price and income instability (Taylor and Taylor, 1952:1–53; Edwards, 1940; Davis, 1940). During the late nineteenth century, an academic field of farm management teaching and research had begun to develop in the land grant colleges in response to the growing complexity of farmers' management decisions under the impact of nearly continuous technological change and the commercialization of farm production. The earliest pioneers were typically agronomists and horticulturists, such as Thomas F. Hunt and Liberty Hyde Bailey at Cornell, who taught some of the first courses in the economics of agriculture. Farm management eventually evolved into today's agricultural economics profession, members of which provided much of the early leadership in the development of the Bureau of Agricultural Economics and its precursor organizations (Taylor and Taylor, 1952:53–156). By 1910, USDA was generally considered the finest agriculture science research organization in the world. The BAE reached equivalent status in agricultural economics in the 1930s and 1940s. The importance of economics in agriculture and the professional development of agricultural economics is primarily associated with four names. H.C. Taylor at the University of Wisconsin was most influential over the period 1890 to 1930. George F. Warren, of Cornell University, was a major influence from 1900 into the 1930s. John D. Black, while at the University of Minnesota and later at Harvard University, was active from the 1920s through the 1950s.

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Theodore W. Schultz, first at Iowa State College and then the University of Chicago, profoundly influenced the discipline from the 1930s to the 1980s. Taylor, Black, and Schultz earned their Ph.D.s at the University of Wisconsin, Schultz and Black both under the direction of Benjamin H. Hibbard. There were many others who contributed, but these four and their many students had a profound influence on the development of the economics of agriculture. This group and Taylor's students at Wisconsin were omnipresent in the development and direction of the BAE (Gilbert and Baker, 1997). The problem faced by agricultural economists in the 1920s and the 1930s was a severely limited data base for analysis and an underdeveloped conceptual framework. The long-term effort in agricultural economics and the BAE was to develop a stronger data base to support analysis, along with greater sophistication in quantitative measurement and improvement of the economic and other conceptual foundations of their work. Their success was attested to in a presidential address to the American Economic Association in 1970. In it, Harvard professor Wassily Leontief (and 1973 Nobel laureate) indicted the economics profession for generally failing to design and collect data for the empirical tests necessary to validate the developing theoretical base of economics. In the speech, he exempted agricultural economics from his indictment as having achieved "an exceptional example of a healthy balance between theoretical and empirical analysis and of the readiness of professional economists to cooperate with experts in neighboring fields" (Leontief, 1971:5). Much of this early achievement can be credited to the BAE. From the late 1920s and the 1930s onward, many of the intellectual leaders of the agricultural economics and statistics professions worked in the BAE. The BAE and Lessons Learned The BAE was established in a period of growing economic distress and conflict in agriculture. The United States had expanded farm production during World War I to feed a war-ravaged Europe. Following the recovery of European production after the war, U.S. farm prices land values collapsed in 1920–1921, creating another major economic crisis in U.S. agriculture. U.S. farmers were left with heavy debts and excess capacity. Bankruptcy became endemic. Serious economic problems in farming continued through the 1920s into the Great Depression of the 1930s (Davis, 1940). Restrictive macroeconomic and trade policies compounded the world's economic problems. This intensified the demand not only for economic intelligence but also for economic research and policy analysis to inform public and private decisions dealing with the crisis in the United States. From its establishment in 1922, the BAE found itself in the middle of intense political debates regarding farm relief and appropriate farm policies through the 1920s and the 1930s. This period of unending philosophical conflict over values

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and beliefs in politics and policy is well described by two early BAE leaders, H.C. Taylor (1992) and Nils Olsen (Lowett), as well as by historian Richard Kirkendall and political scientist Charles Hardin. The politicized atmosphere and ideological conflict led many interests to support and many others to question the worth of the BAE's statistical and analytical work, which was growing increasingly sophisticated and complex. At the same time that the BAE sought to standardize and quantify its analytic methods, it found itself under public attack; farmers and their organizations often questioned the validity of BAE estimates, which they found difficult to comprehend and the results of which often conflicted with their current perceived policy interests (Kunze, 1991:79). As a consequence, many politicians, especially some members of Congress, grew hostile to BAE crop estimates, since they believed it was the estimates and associated price forecasts (not macroeconomic policies and declining demand or increasing supply) that were causing declines in farm prices. Congress reacted in 1929 by passing a law prohibiting the USDA from publishing any cotton price forecasts—and this legislative prohibition still stands (Townsend, 1987; Black, 1953:386–387). In addition, during the Hoover administration (1929–1933), the prohibition was extended to other farm commodities by executive action. BAE forecasts were limited by the administration to those with a "need to know" and could not be provided to the general public (Kunze, 1991:79). Faced with a debilitating problem of economic illiteracy amongst farmers, the BAE in cooperation with the land grant colleges early put an expanding effort into economic education, especially in conjunction with and in support of the market information (i.e., Situation and Outlook) work begun in the 1920s (Taylor and Taylor, 1952:447–479). The BAE outlook program expanded previous USDA market intelligence and added economic analysis. Political opportunism combined with very low levels of economic literacy among farmers, organized interests, federal program agencies, and in politics have historically plagued USDA analysis of farm markets (Cochrane, 1965:456–457; 1983:87; Lowett, 1980:65–66). Secretary of Agriculture David F. Houston (1913–1920), an economist by training, presided over and supported the creation and development of economic work in USDA. H.C. Taylor was head of the Department of Agricultural Economics at the University of Wisconsin in 1919, when Secretary Houston invited him to Washington to head the Office of Farm Management and to help organize the economic analytic capacities of USDA. The next secretary, Henry C. Wallace (1921–1924), strongly supported the developing economic work of the department. During Wallace's tenure, a period of considerable economic turmoil in agriculture, the BAE was created and Taylor became its first chief (Baker and Rasmussen, 1975:55 Taylor 1992:31–41). The post World War I crisis in farming was generating widely differing proposed solutions to the "farm problem." Not surprisingly, this led to intensely partisan political conflict in the 1920s and the early 1930s. The different "solu-

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tions" ranged widely: letting the markets work without government intervention, government-led export dumping, turning management of markets over to farmer cooperative to control production and thus prices, government-guaranteed purchasing-power parity for farm prices, and a two-price domestic allotment plan to separate the domestic market from foreign markets (thus protecting a higher subsidized price for domestic producers). The BAE was asked by the various secretaries of agriculture to evaluate different proposals, some of which were unworkable as presented and all of which involved costs or problems that advocates did not want exposed in public forums. In the midst of this political turmoil in the 1920s, and the 1930s, the BAE under Taylor attempted to provide objective research and policy analysis. This objective analysis attracted critics and left the BAE and its leadership quite vulnerable when not protected by the administration. After Secretary Wallace's death, Secretaries Gore (1924–1925) and Jardine (1925–1929) protected BAE Chief Taylor for a while, but Jardine, unable to convince him to resign, finally fired Taylor in August 1925 at the Coolidge White House's insistence (Baker and Rasmussen, 1975:55; Taylor, 1992:207–219). BAE leadership continued to turn over rapidly during the next few years. The fourth chief of the BAE, Nils Olsen, survived seven years (1928–1935) under three secretaries by following a conservative, risk-averse strategy that tried to serve the secretary's needs but kept himself and the BAE away from public involvement in analysis of policy issues on which the administration had not yet taken, or was unwilling to take, a position. Olsen was fully committed to an objective research and information role for the BAE, but he was not a supporter of the intrusive New Deal programs. Eventually Olsen resigned in 1935 when, in his view, the new secretary, Henry A. Wallace (1933–1940), who was the son of Henry C. Wallace, grew less and less supportive. Wallace was reluctant to make decisions in an unstable political and policy environment that had, in the early New Deal, dissolved into unending ideological warfare (Lowett, 1980:222–235; Baker and Rasmussen, 1975:56–58; Kirkendall, 1982:16–17, 77). Secretary Wallace, despite his cool relations with Olsen, was an astute and heavy user of BAE intelligence and research. Indeed, beside his success in creating the first hybrid seed company and as editor of Wallace's Farmer, he was an accomplished professional geneticist, statistician, and economist. Transformation of the USDA Role Between 1993 and 1939, the nature of USDA was fundamentally transformed. New Deal programs of the Roosevelt administration (1933–1945) addressed the multiple problems of agriculture and rural America and led to the creation of numerous action agencies. Created in this period were the Soil Conservation Service, 1935 (now the National Resource Conservation Service); the

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Rural Electrification Administration, 1939 (now the Rural Utilities Service); the Foreign Agricultural Service, 1938; the Farm Security Administration, 1937a (later renamed the Farmer's Home Administration and today divided between the Farm Service Agency and the Rural Housing and Community Development Service); the Federal Crop Insurance Corporation, 1938 (now part of the Farm Service Agency); the Commodity Credit Corporation, 1933; and the Agricultural Adjustment Administration, 1933 (known then as the AAA or Triple A, later renamed the Agricultural Stabilization and Conservation Service and now part of the Farm Service Agency) (Baker et al., 1963:463–519). These organizations delivered services or resources or both to farmers and in many cases developed offices at the state and local level with farmer advisory committees that quickly became specialized clientele organizations. They lobbied Congress and USDA in support of the agency and its program (Kirkendall, 1982:167–223; Lowi, 1962). This approach fragmented—and focused by function and commodity—the political interests in agriculture (Lowi, 1962; Heinz, 1970). The larger interests of the food and agricultural industry and of the nation tended to be ignored, except as the secretary and the president imposed them on the debate. The nature and dynamics of agricultural politics changed in Congress, the secretary's office, and the countryside. The internal environment of USDA was soon filled with politically powerful interests that made the secretary's role far more difficult and outmatched the political influence of all of the research and education organizations that had characterized the earlier USDA (Hathaway, 1963:201–206, 210–214; Gaus and Wolcott, 1940:64–81, 264–265; Rasmussen and Baker, 1972:Chapter 3; Lowi, 1962; Truman, 1965). In the external environment of the department, the development of a state and local grassroots program and political presence for many of these federal action agencies created a competitive, or potentially competitive, relationship with the politically active farmer organizations and with the land grant colleges' Cooperative Extension Service (Hardin, 1952, Chapters 6, 9, 15; Lowi, 1962; Rasmussen and Baker, 1972:Chapter 12). Thus, not only had the internal nature of USDA changed but its relationship with its former external partners in agriculture had also shifted from a tension-filled but generally complementary relationship to one which in specific policy areas were conflict-ridden and often inherently competitive. In the midst of his reorganization of the department in 1938, Secretary Wallace moved the BAE, then under the leadership of Howard Tolley, to the Office of the Secretary as USDA's policy planning and coordinating arm—that is, a staff agency to the secretary doing research and policy analysis, but first and foremost helping the secretary plan and manage the action of USDA agencies on this newly created battlefield (see Figure 3.1A). By 1942, in the combat that ensued, the BAE had slowly lost significant parts of its planning and coordination role. Wallace was succeeded in 1940 by Secretary Wickard (1940–1945), who was "largely unable to use any kind of policy making machinery" (Black, 1947:1033). Finally, in 1946, a badly battered BAE was removed from its role as

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Figure 3.1 Reporting line for the Bureau of Agricultural Economics (BAE): (A) 1938–1946 and (B) 1946–1953 (dismantled in 1953). "staff to the secretary" by Clinton Anderson, a former member of Congress and now the new secretary (1945–1948). Anderson returned the BAE to its original role as an economic intelligence and research agency (see Figure 3.1B) (Baker and Rasmussen, 1975:60–62). Paul Appleby, Wallace's deputy and organizational guru, and Harvard professor John D. Black had both argued against the

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direct involvement of the BAE in policy decisions and anticipated the political dangers for a research unit in such a role (Kirkendall, 1982:232). Demise and Fragmentation By the early 1940s, the BAE had acquired a full choir of critics. These critics saw the world in simpler, more monochromatic terms than did economists. In the heat of battle, many critics had great difficulty accepting such elemental economic notions as "opportunity costs" and the "external effects" of policy actions, to say nothing of their ideological difficulty with and rejection of the centralized economic planning effort of the New Deal period in which many economists and the BAE had been so visible. The economic interests in agriculture were by now well organized and the new USDA programs had created a high-stakes struggle for political control. Critics and enemies of the BAE included many USDA action agencies, which, with congressional support, were determined to do their own planning and resisted any coordination by others—often including the secretary. Other major critics were farmer organizations, especially the most politically influential American Farm Bureau Federation, and the major farm commodity organizations in cotton, wheat, feed grains, etc. In addition, many members of Congress were critical of the BAE, especially conservatives of both parties with important rural and business constituencies who were the major beneficiaries of USDA programs, on which many were now quite dependent (Baker and Rasmussen, 1975:61–64; Hardin, 1946, 1952). Consequently, following a change in party control from the Truman to the Eisenhower administration in 1953, the new secretary of agriculture, Ezra Taft Benson (1953–1961), a strong critic of government planning and the market interventions of USDA over the previous two decades, announced the abolition of the BAE. Its functions were divided between two new agencies. Farm price, income, and marketing research and data collection went to the Agricultural Marketing Service. Farm management and other economic research went to the Agricultural Research Service (Baker and Rasmussen, 1975:64–65; Wells et al., 1954:1–21). Under the title "The Fragmentation of the BAE," this event was described and discussed by a distressed agricultural economics profession in its Journal of Farm Economics. Secretary Benson's case for breaking up the BAE was made by the last chief of the BAE, Oris V. Wells (1946–1953), while all other leaders of the profession in varying degrees were quite critical of the decision and its impact (Wells et al., 1954). Strong conclusions from this experience were drawn at that time by two of the most distinguished leaders of the profession. Theodore W. Schultz (1954:19) of the University of Chicago (and 1979 Nobel laureate) asked himself "Why have these things happened? and answered:

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Essentially because agricultural economics has been so highly vulnerable to changes in the constellation of political forces within the Executive, the Congress, Farm Bureau and other interest groups and within the far-flung action agencies of the USDA. To understand the vulnerability of the BAE, one has to appreciate the profound unfriendliness which these organized political forces, both inside and outside government, can feel for agricultural economics research that does not provide the "right" answers . . . . The powerful AAA of the late thirties was often unfriendly to agricultural economics research, even to the Agricultural Outlook. Where an economic analysis touched them, it usually came under AAA fire. . . . The Soil Conservation Service reacted much the same . . . . . . . To those who were in opposition to the forces represented by the USDA, this BAE effort in . . . planning was simply a Trojan horse to be destroyed, as was soon the case. The Agricultural Outlook referred to above is the BAE's early forward-looking intelligence and market forecasting effort to improve the accuracy of market expectations and pricing efficiency in agricultural markets. The AAA (Agricultural Adjustment Administration) was the action agency responsible for farm price support and production control programs. Schultz concluded that the economic research function could not be the agent and advocate of major programs. To do so "and thus to maximize its vulnerability, either destroys its objectivity or forces those economists who stay to do 'harmless, descriptive work'" (p. 20). He then listed five guiding principles for achieving orderly and unbiased agricultural economics research in the USDA (pp. 20–21): 1.   Agricultural economics research should be placed in relatively sheltered position in relation to the political instability inherent in the USDA. 2.   Agricultural economics research should be so organized that it is relatively independent from (1) the day-to-day staff work of the Secretary's office, (2) the constant, routine, "trouble shooting" work of the quick program analysis work required by the several action agencies. 3.   Agricultural economics research should represent an effort at long-run analysis where competent workers seek in determine the more basic economic characteristics of agriculture and to explain the behavior of these attributes of the economy. 4.   Agricultural economics research should be organized to take advantage of the strong complementarity between and among production economics, distribution economics. (of which marketing is a part) and of price and income economics. Some important functions also indicate complementarity, for example, The Agriculture Outlook and the publication of Agricultural Economics Research, the preparation of Situation Reports and others.

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5.   Agricultural economics should be so organize that it has the capacity to recruit and select competent economists and to induce such individuals to join the staff and to make a career as agricultural economists in the USDA. Professor John D. Black of Harvard, in an earlier 1947 article, reviewed and assessed the BAE experience from 1928 to 1946. His conclusion is similar to that of Professor Schultz (Black, 1947:1035–1036): The compelling and sufficient reason why the Bureau should not be the general staff of the Department is that it cannot safety mix this function with that of collecting and analyzing the data of current change, and with other research which it very much need to do. We must therefore have a Bureau solely for these latter functions. The general staff should be attached directly to the Secretary. Does this mean that the Bureau should be isolated from the Secretary's Office and from policy making? By no means. It should follow policy and program matters as closely as possible. It should assemble all pertinent data and information bearing on policy and analyze them as closely as possible. It should assemble all possible economic data as to how the different programs of the Department are working out, and weigh and evaluate them, It should even go so far as to predict in detail how alternative program proposals will work out. But it should not undertake to choose policy, nor even to say what will be the best policy. This latter is the function of the Secretary (italics in original). It had begun to be clear early that the provision of objective research and analysis, and even the reporting of market statistics, could not long survive as a USDA function , if not supported internally and defended against external political assault by the administration's political leadership. Assaults came from any organized interest then unhappy with BAE analysis that did not support its program or policy position. The administration was likewise pleased when BAE research supported current programs, but not when objective research failed to support them. Assault sometimes came after a change in administrations, when it was thought that economists had given too much support to the previous administration. In his examination of the "Age of Roosevelt," the historian Richard Kirkendall concluded (1982:257): The degree of success that the social scientists enjoyed, however, depended heavily upon their relations with these political men. The years of accomplishment from 1933 to 1940 were years of substantial support from the President and the Secretary of Agriculture; the years of frustration after 1940 were marked by little support for the social scientists from these political leaders. This support, of course, requires political leaders to have an understanding of how to use economic policy analysis, which, as John D. Black observed, was seriously lacking in some secretaries of agriculture (Black, 1947:1033). New Deal efforts to cope with the collapse of industrial and agricultural mar-

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of the 1980s, U.S. farm prices dropped drastically along with farm land values, while input costs rose at an even faster pace. Instead of the expected food shortages, surplus stocks and program costs grew rapidly. This recession and excess agricultural capacity created the 1982–1986 farm crisis in which many farmers who had borrowed most heavily during the expansion of the 1970s faced a negative cash flow and were often unable to pay the carrying cost of their debt. Farm bankruptcies became widespread as farmers faced the most severe financial problems since the Great Depression (Stam et al., 1991). It also turned the USDA and ERS agendas toward a greater focus on farmers' problems. Unfortunately, the 1981 farm legislation had assumed that the inflation, food shortage, and demand expansion of the 1970s would continue indefinitely. Congress wrote into legislation a specific set of rising price supports that exceeded the declining world market prices in the early 1980s. Although farm income was protected by deficiency payments, U.S. exports lost market share to competitors, and growing government-held Commodity Credit Corporation stocks burdened the market (Tweeten, 1989:341–345; Cochrane, 1993:154). By 1982, the new administration in the USDA not only faced an entirely different set of problems than they had anticipated in 1981, but also suddenly and unexpectedly they had to reverse policy direction—from a philosophically comfortable free market approach to one of aggressive government management of the market (Lesher, 1991). It remained for the 1985 Farm Security Act to repair a self-inflicted wound that delayed the agricultural sector's recovery (Tweeten, 1989:341–345). U.S. farm exports began to rebound after 1985 as the world recovered from recession, and the 1985 agricultural legislation programmed U.S. price support loan rates to stay well below world market prices. This recovery coincided with the start of the Uruguay round of trade negotiations under GATT (1986–1994), in which a major U.S. objective was reduction of agricultural trade barriers (and thus farm subsidies), especially in the European Common Market. Through each round of trade negotiations, ERS had become more involved, developed greater capacity, and provided more economic research and analysis on agricultural trade issues. ERS had a significant impact on the Uruguay round (1986 to 1994) through analytic support of the secretary and the U.S. trade negotiators. A major contribution was the provision of a single quantitative measure of the different barriers to trade calculated for the 40 largest trading countries—as we said in Chapter 2, identifying winners and losers in agricultural trade. Its "producer subsidy equivalent" provided a comparable measure of how badly a nation was sinning against the ideal of free trade. A similar measure of consumer food subsidies, a "consumer subsidy equivalent," was also provided. These synthetic measures had a significant influence in framing the issues for negotiations between participating countries, although estimates for some specific commodities did not result in entirely defensible results. Two unavoidable facts condition the future of U.S. agricultural trade. First, any significant expansion in demand for U.S. farm output now depends on ex-

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ports. Expansion in domestic food demand is severely limited by the slow growth in the U.S. population combined with almost no increased demand for farm food production as income increases. At the high per capita income levels of an industrial nation, the U.S. already consumes about as much food as physically possible. Thus, economic intelligence and research on agricultural trade will continue to be a major item on the political agenda of farmers, farm input firms, and the food industry. Second, the demand for U.S. food and agricultural exports depends on continued economic growth in low- and middle-income developing nations and improved equity in the distribution of income in those nations. It was 1994 before farm exports regained their 1981 levels and 1995 before the net worth of U.S. farms regained their 1980 level (Stam et al., 1991). By the late 1980s, farm policy and farm program budgets (and subsidies) were being politically constrained by the pressures to reduce trade barriers in agricultural markets and by efforts to slow a burgeoning U.S. budget deficit. Throughout the 1980s, ERS economic analysts and researchers faced the pressures of a full and an increasingly diverse agenda of demands (Lesher, 1991). New environmental and food-related interest and advocacy groups were propelling legislative change that affected the ERS agenda. By 1980, the involvement and influence of environmental interest groups in negotiations on farm legislation was unavoidable. By the middle 1980s, passage of farm legislation was not possible without satisfying some of the major goals of environmental interests. The pressure to restrain the rapidly expanding budget deficit was turning federal budget making into a zero-sum game, which made farm bills even more difficult to pass than had been the case in the 1970s. Broader political coalitions were now necessary for enactment of farm legislation. Growing public concern over the environmental effects of farm programs made the more pragmatic of organized environmental interests attractive legislative partners for farm interests. As a consequence, the radical notion of the early 1980s of forcing farmers to comply with conservation requirements to be eligible for commodity program support became law in the Farm Security Act of 1985. This form of cross-compliance provided assurance that farm and environmental policies were consistent, muting environmental criticism of farm programs. Plowing up erodible soils ("sod busting") or draining remaining wetland ecosystems ("swamp busting") now made one ineligible for farm program support. Major policy questions were raised in this change. Indeed, the change itself was fueled in part by the factual base provided by prior environmental research done in ERS (Potter, 1998:50–51, 56–57, 61–64). Over the decade of the 1980s, USDA publications show that ERS research and analysis covered a still-widening spectrum of topics, but at the same time, due to the farm crisis, it increased the focus on problems related to agriculture in production, finance, trade, environmental pollution, and natural resource sustainability and conservation. ERS prepared background materials and analysis for the 1981 Agriculture and Food Act, the 1983 payment-in-kind legislation, the

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critical Food Security Act of 1985, and the 1990 Food, Agriculture, Conservation and Trade Act. The increasing complexity of the titles on these farm acts is indicative of the growing diversity of the subject matter and the political coalitions involved in the legislation. This broader agenda meant that, besides agriculture, ERS was also doing work on food stamps, direct food distribution, and food safety, rural community development and welfare problems, and rural-urban land use, and it was putting more effort into environmental and natural resource issues, often in collaboration with other agencies in federal and state government. Political and policy support for rural community development, which had increased in the late 1970s, began to wane in the 1980s (Daft, 1991:150). Effective policy interest in rural development has long experienced wide, repeated swings between strong interest and support and almost none. In part, the lack of consistent political support appears due to the great diversity of rural interests and a consequent lack of an organized voice or coalition of voices able to sustain rural interests at state, local, and national levels. Despite these fluctuations in support, ERS has continued to develop and to maintain the only systematic, national data base for understanding and analyzing the problems of rural development. A major ERS innovation in the 1980s created greater capacity for generalizing causal relationships in rural development, by developing a standard, quantified classification of the primary categories of economic activity for all U.S. rural counties. Without this sustained ERS data base, much of the comparative rural development work done at the state level and in universities would not be as useful or even possible in some cases. Even ERS's agriculturally related work grew more diverse in the 1980s. Publications on new topics in agriculture or those demonstrating increased frequency included, for example, pesticides, energy requirements and costs, foreign ownership of farm land, changing structure of farming, economies of farm size, corporate farming, ethanol, bovine somatotropin (a hormone) use in dairy production, and new farm regulations on sod busting and swamp busting, to name a few examples. ERS has faced difficult problems in maintaining the resource base and organization of its highly effective S&O teams. As the organization of ERS shifted to deal with a broadening scope of issues beyond agriculture and as its resource base shrank, the S&O teams lost resources and support. Martin Abel (1991) has described several weaknesses that developed by the late 1980s. Without the integrative effects of S&O teams, the research, policy analysis, and information and intelligence functions of ERS, although still strong complements, became more difficult for management to coordinate. By the mid-1990s, the ERS investment in S&O commodity market analysis had become perilously thin. Compounding the problem was the late 1970s creation of an independent World Agricultural Outlook Board. This change made organizational sense, but it also transferred professionals and funds away from ERS and created ambiguity and uncertainty about the ERS role and responsibilities in the S&O programs of the department

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that have not yet been resolved. This is indicative of a growing organizational issue that USDA and ERS face today in producing and mobilizing information and analysis of policy problems. Policy issues increasingly require collaboration of diverse USDA (and often non-USDA) agencies to create and interpret the necessary information and analysis. In these cases, no single agency, including ERS, can by itself ensure the production of a high-quality, relevant product. Leadership for such an effort must come from the secretary's level, and on occasion from the interagency cabinet level. As a consequence of the farm crisis, USDA expenditures on farm programs again grew to be the largest USDA budget category through the mid-1980s. Despite their high rate of growth, food stamp and nutrition programs exceeded farm program budgets in only four years in the 1970s and five years in the 1980s. Farm program expenditures fluctuate widely and have been largest when agricultural market prices are low, surplus stocks high, and farmers in financial trouble. Since 1988, however, the still-expanding food and nutrition budget has consistently been the largest expenditure category. By the end of the 1980s, it had grown to 50 percent of the USDA budget. Today, food and nutrition expenditures are annually 60 percent or more of the total USDA budget (Figure 3.3). Food stamps account for most of these expenditures (Figure 3.4). Natural resource and environment programs have also continued to grow and, in the mid- to late 1990s, now rank third in size of budget and account for more than 7 percent of a $60 billion dollar USDA budget (Figure 3.3). Food safety, although not a large budget item, grew in policy importance in the 1980s. Farm program expenditures, while varying widely, continued to decline slowly as subsidies have been constrained or reduced in every farm act since the 1985 legislation. This trend ended in 1998 when Congress began responding to another farm income "crisis." The politics of agriculture became even more fragmented over the 1980s due in part to continued industrialization of the food system, and also to an opening up of access to U.S. political institutions, including Congress, and to a progressive fragmentation and proliferation of all economic and social interests (Browne, 1995; Bonnen et al., 1996). Agricultural interests and leaders in Congress can no longer exclude other voices from agricultural policy, and agriculture, as an economic sector, has become too interdependent with other domestic sectors and too important and politically difficult a dimension of trade negotiations to be left to its own devices in legislation and trade matters. Thus, depending on the topic, other cabinet agencies now participate in and influence decisions that once were the sole purview of USDA, or nearly so: the Agency for International Development and the Department of State in foreign food aid, the Department of the Interior and the Environmental Protection Agency in many environmental and natural resource issues in agriculture; and the Department of Health and Human Services in food programs. Half the cabinet participates in international trade negotiations, typically including the departments of State, Treasury, Commerce, Labor, and Defense. The policy process has become far more complex and deci-

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Figure 3.4 Federal expenditures on food programs, 1962–1996. Source: Economic Research Service, Historical Budget Outlays, electronic data base, U.S. Department of Agriculture, March 1995. sions more difficult to reach. At the same time, the "farm vote" is now so relatively small that, unless the farm sector is in serious trouble (as it is again today), presidents no longer feel compelled to pay much attention to farm policy during their campaigns—or afterward. Congress is the dominant forum for farm policy today. In ERS, John Lee followed Kenneth Farrell as administrator in 1981 and served for 12 years through the Reagan and Bush administrations. He retired in 1993, having had the longest tenure of any administrator of ERS. Lee and his first boss, Assistant Secretary for Economics William Lesher, inherited political trouble with Congress. ERS had done earlier research on the recent embargoes, which suggested that they had failed to achieve their purpose—a conclusion that a later, large-scale, academic-based research project validated (Economic Research Service, 1986). This result, plus the conclusion of work in the 1970s on the growing concentration of production and the changing structure of farming, left some influential members of Congress quite critical of ERS. One member of Congress introduced an amendment to the 1981 Senate agricultural bill that would have reduced ERS numbers by more than 100 positions. The new, politically experienced leadership of the department successfully defended ERS (Lesher, 1991). The assistant secretary subsequently had other uncomfortable occasions to defend ERS research from attack, including pressure to kill an ERS research project.

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Over the 1970s and 1980s, many farmers became increasingly resentful of the growing intrusions of nonfarm interests and programs into "their department" and "their programs." This resentment created political difficulties for Congress and USDA as early as 1973, when the negotiations with labor and consumer interests needed to pass the 1973 farm bill had to be handled through third parties to protect the principals from political retribution (Bonnen, 1980). Thus, when the farm crisis of the early 1980s occurred, not only was a substantive response to farmer problems necessary, but also a less substantive—even symbolic—response was needed to assure farmers of USDA political concern and commitment to action. In this context and under the pressure of both an erosion in real dollar resources and a decline from 1970 to 1980 of well over 100 personnel positions, ERS made two organization changes. The field staff, stationed at land grant universities since the BAE days, was disbanded in 1983 and its approximately 200 positions moved to Washington, D.C. (Rasmussen, 1991:89). This had a substantial negative impact on the smaller departments of agricultural economics and on ERS-university relations. From the Washington, D.C., point of view, the field staff had become too involved in university research agendas and was disconnected from the national mission of ERS. Field staff, in contrast, saw their role as one of helping to maintain good university-ERS relations, providing ERS with direct access to university research, facilitating joint work and also creating greater ERS capacity to understand and analyze local and regional problems, which the growing complexity of the farm programs required ERS to address. A significant number of the field staff left ERS rather than move to Washington, D.C. This increased the size of the staff in Washington, D.C., but it did not change total ERS numbers, since field staff had always been included in the total personnel numbers. Total ERS personnel numbers have continued to decline up to the present (Table 3.2). Following the substantial increase in their work on farm crisis problems, ERS in 1987 again modified its division structure to accommodate the focus of its work, changing division names so that it appeared symbolically as if agriculture were its only concern—which clearly was not the case (Box 3.1). Changing Resource Base With a few fluctuations, inflation-adjusted appropriations for ERS grew by 24 percent between fiscal 1962 and fiscal 1979, and the number of employees remained relatively stable, at about 1,100 until the mid- 1970s. Since 1978–1980, inflation-adjusted appropriations and personnel numbers for ERS both trace a pattern of slow decline, to just over a 20 percent drop in the budget and more than a 40 percent cut in personnel. Almost 60 percent of this decline in personnel and almost 80 percent of the decline in budget have come since 1992. In addition, ERS received budget transfers from other agencies. These trans-

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fers came both from within USDA and from outside, for contract research and analysis (Table 3.1). In inflation-adjusted terms, these transfers have ranged from a significant part of total resources (26 to 29 percent) in the last half of the 1960s to a quite small proportion (4 to 5 percent) over the late 1980s. In the period since 1992, the importance of transfers has increased again, varying between 10 and 18 percent of ERS's total inflation-adjusted resources. One has to add the qualification that some unknown portion of such transfers in the USDA budget have periodically been pass-throughs to land grant universities and other organizations and not net additions to ERS resources. The Agency for International Development (AID) financed much of ERS's early work in international food aid and development. AID has continued to depend on ERS research capacities, most recently contracting $2–3 million per year with ERS from 1992 to 1996. The Soil Conservation Service (now the Natural Resources Conservation Service) has funded many major research efforts in ERS, including the large multiple river basin studies of the 1960s and the 1970s (Bowers, 1990:242–243). A good portion of the increase in budget transfers since 1992 has consisted of pass-throughs to state organizations from the Federal Crop Insurance Corporation ($1–2 million per year) and the Rural Housing and Community Development Service ($2–3 million per year). Thus, the apparent increase in budgetary transfers to ERS since 1992 is illusory, since most of the increase appears to be in the form of pass-throughs (ERS Information Services Division communication to panel). When ERS and the Statistical Reporting Service (now NASS) were established in 1961, each had about 1,000 employees. In fiscal 1998, ERS had 554 and NASS has about 1,100 total personnel (Table 3.2; NASS internal communication). In each case in the 1960s, professionals probably constituted no more (and probably less) than half of the total number of employees. It is important to remember that, in a computationally intensive environment during the age of the preelectronic office, most calculations—both research and statistical—were done by large pools of clerks using technologies no more advanced than pencils, tabular paper, slide rules, and comptometers (precursor to the early Frieden and Marchant calculators). In these early days (Seaborg, 1991:25–26): You could see ditto machines with the smell of stencils and black ink, not copy machines that can readily produce many collated copies of your project. Slide rules were in common use as office machines made a lot of noise because they were mechanical. IBM electric typewriters were typical, but there were still many manual machines in use. Stacks of punch cards filled file drawers because that is how data was entered into the mainframe computers. By-the-way, the drum type computer was still in use. The use of computers was carefully monitored and each job order had to be justified. It often took several days to run a rather routine analysis. Information on the composition of ERS personnel is available for only a few recent years (from 1995 on). Between 58 and 60 percent of all ERS positions

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TABLE 3.3 Economic Research Service Permanent Staff Count at end of the fiscal year Economists Other Social Scientists Other Staff Total Staff 1995 354 26 231 611 1996 349 22 213 584 1997 331 21 202 554 25 April 1998 306 19 198 523   Source: Information Services Division of the Economic Research Service, U.S. Department of Agriculture. today are held by professionals classified as economists. The next largest group, 36 to 38 percent, are support staff. Another 5 percent of the ERS staff are social science professionals other than economists (Table 3.3). Of the economists, 62 percent have Ph.D.s, 35 percent have master's degrees, and 3 percent have bachelor degrees (Table 3.4). Although actual counts are not available, estimates obtained in interviews with ERS economists from the 1960s suggest that, given the office and computational technologies of the early 1960s, at least half, probably more, of early ERS personnel were support staff, whereas today the number is between 35 and 40 percent. If these estimates are accurate, then the numbers of professional economists in ERS have declined by 40 to 50 percent since 1962 and support staff by about 65 percent. It is also worth noting that in the BAE and in the early ERS days, all, or practically all, economists on USDA's rolls worked in the BAE and ERS. Today, however, the majority of USDA economists me employed outside ERS in other USDA agencies, most significantly in the Foreign Agriculture Service, the Natural Resource Conservation Service, and the Forest Service. In addition, the larger action agencies now typically have a dozen or so of their own professional economists working on their economic policy and regulatory program issues (Table 3.5). The decline in ERS resources and personnel can be attributed to a number of TABLE 3.4 Highest Degrees Held by Economic Research Service Economists (March 1997 Survey Data) Total Respondents Ph.D. Master's Bachelor's 297 183 104 10 Percent of total 62% 35% 3%   Source:Information Services Division of the Economic Research Service, U.S. Department of Agriculture.

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TABLE 3.5 U.S. Department of Agriculture Employees Classified as Economists (as of 13 May 1998) Economic Research Service 306 Foreign Agriculture Service 113 Natural Resource Conservation Service 66 Forest Service 47 Rural Business and Cooperative Service 26 Agricultural Marketing Service 25 Office of the Chief Economist 18 Farm Services Agency 16 Animal and Plant Health Inspection Service 12 Others (9 agencies) 29 Total 658 Note: There are many more economists in the USDA, a significant portion with M.A. and Ph.D.s, who are classified in other categories. A major example would be the large number of ''foreign service officers" in the Foreign Agricultural Service, most of whom were trained as economists. Source: Information Services Division of the Economic Research Service, U.S. Department of Agriculture. sources. Over the period since the 1960s, automated and electronic equipment have substituted for a good portion of the statistical clerks and other support personnel. After a period of growth in government-wide investment in social science research over the 1960s and 1970s, the decade of the 1980s saw major cutbacks in such research and the growth of an anti-intellectualism in society. Support for government research has eroded, especially in highly visible, contested areas of public policy. In the more recent period since fiscal 1992, government efforts to reduce the large federal budget deficit have resulted in declining appropriation for most cabinet agencies. In addition, interviews conducted by the panel produced multiple accounts of dissatisfaction with the quality of ERS analysis and its responsiveness to clients. These are difficult to assess. Complaints ranged from erroneous analyses, to refusal to share research done for trade negotiations in agriculture, to the belief that some critical research and analytic product provided to Congress or the Office of Management and Budget was constrained by the politics and policy positions of USDA. These complaints were often contested and my be wrong, but it is important to understand that irrespective of the complete accuracy of these complaints, these perceptions alone erode the credibility of ERS and the value of its products. It should be noted that since 1992 the ERS base budget has declined at twice the rate of USDA a whole. If executive and legislative leadership do not soon

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agree on common rules for access to ERS services and act to ensure the performance, independence, and credibility of this research and information function, it will continue to decline in capacity and relevance to the increasing complexity of the industry and policy areas it serves in food, agriculture, natural resources, and the environment. Lessons Learned More than seven decades of BAE-ERS experience suggest some clear principles that govern the successful organization and management of a federal agency dedicated to research and analysis of high integrity. First, the history of the BAE-ERS demonstrates the important value of a cadre of professionals in government capable of providing reliable primary data, secondary data and analysis, short-term problem analysis, and longer-term research products—especially when faced with new problems or in conflicted periods of rapidly changing conditions (e.g.,see Finegold and Skocpol). Second, a federal research and analysis agency must be protected by both its cabinet secretary and the Congress from politicization of its products and its internal decisions. The integrity and long-term survival of such a service function is highly vulnerable to the political conflict that accompanies the policy process. Government research units have little capacity to protect themselves through their own actions, and few of their clientele are willing or able to do so. In turn, the agency must expect, and be allowed, to provide both the Congress and the secretary with access to reliable, high-quality research and information products (Kirkendall, 1982:257; Bowers, 1990:236). Failure of the agency to provide a high-quality, relevant product will lead to the eventual demise of the agency. As a corollary, Congress and the cabinet secretary must be free, and be expected, to disavow any responsibility for a research or information product that conflicts with their views, even as they must defend the independence of the research agency. Third, all major federal research and information products eventually develop a diverse set of users in both the private sector and well beyond the federal government in the public sector. In a democratic, open society, this is both inevitable and necessary. Common rules should govern such access, if conflicting expectations are to be avoided. Fourth, if it is to maintain a reputation for, and the reality of, integrity of product, a federal research and analysis agency must not be expected to participate directly in policy decisions. It may evaluate problems and alternative solutions, but it may not safely recommend or advise a specific policy action or participate in its implementation. As we have seen, such actions can destroy an agency. As a consequence, as both T.W. Schultz (1954) and John D. Black (1947:1035–1036) long ago concluded, the day-to-day staff work for the secretary's office and the other "constant, routine, 'trouble shooting' work or quick

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program analysis" (Schultz, 1954:20) should not be done by a federal agency responsible for objective, high-integrity, longer-term analysis and research. Fifth, a federal research agency should be organized and managed to take advantage of the strong complimentarity between research products, problem analysis and secondary data development, and its analytic structures (Schultz, 1954:20–21). Sixth, the Office of the Secretary must have the capacity to use economic research and problem analysis. Since it is unrealistic to expect every secretary to be an economist, this means that there should be a political appointee (i.e.,assistant secretary for economics or chief economist) who has these skills and who reports directly to the secretary. A federal research unit should be independent and protected by the secretary's office from all direct political influence, but this arrangement creates an organizational dilemma. It must also be connected to the line structure of the cabinet department at high enough level to remain well informed about the longer-term information and research needs of decision makers but remain functionally separate—i.e., independent. Lessons from the past strongly suggest that the research agency should report to an assistant secretary for economics (or policy). This would be a political appointee with direct access to the secretary who is a policy economist with experience necessary to understand, protect, and balance the goals of independence, policy access, and responsiveness (Cochrane, 1983:30). History demonstrates that failure to provide such a position leaves the research unit subject to the political whims and pressures of cabinet secretaries and deputy secretaries who are often under too much political pressure to respect the integrity of such units. Since 1993, ERS has been in just such a vulnerable and hazardous position within the line authority of USDA.