The Forgotten Lessons of the “Carter Embargo”
Posted on July 27, 2018
Once, when walking across the Charles Bridge in Prague, a friend asked if I knew the story behind the stunning, 14th century marvel under our feet. No, I replied, mostly because my education did not require much European history.
“Then,” my friend replied, “you are not educated.”
It wasn’t snobbery; it was a fact. Most Americans not only don’t know world history very well, we often struggle to remember our own. We are, after all, a future-focused nation, more confident in our ability to overcome past mistakes than concerned about repeating them.
A timely example is the 1980 U.S. grain embargo President Jimmy Carter imposed on the-then Soviet Union as a partial response to that nation’s invasion of Afghanistan. Many rural graybeards remember a swift, anti-Carter response from American farm groups. Most also pin the ensuing, devastating 1980s farm crisis on the “Carter Embargo.”
Both memories, however, are wrong.
American farm groups strongly supported the embargo, noted Robert Paarlberg, a political scientist from Wellesley College, in the Fall 1980 issue of Foreign Affairs. It was American longshoremen—the dockworkers who foresaw 17 million metric tons of grain not being loaded at U.S. ports—who were the loudest bellyachers.
Farmers held their tongues, explained Paarlberg, because the U.S. Department of Agriculture (USDA) used the powerful “Commodity Credit Corporation [CCC] to assume contractual obligations of exporters for undelivered embargoed grain. By midsummer, the CCC managed to ‘retender’ most of the grain back into market channels.”
Somehow, that fact gets lost in the fog of time.
Embargo support “began to falter,” though, when commodity prices began to slide after the tight-fisted Carter White House “insisted there would be no paid ‘acreage’ (diversion) program for either wheat or corn in 1980” despite the embargo.
The White House penny-pinchers did, however, raise “government ‘loan prices’”—remember them?—“for corn and wheat,” increased the Farmer Owned Reserve (FOR) levels, raised the FOR release prices, and boosted payments for stored grain.
But those ag-directed actions had little effect on the broader, decade-in-the-making inflationary dam that crumbled later that year. Interest rates, already high, ballooned to 17 percent by 1981. The sky-high rates pushed the dollar’s value even higher to undermine U.S. ag exports far more than the Soviet embargo.
American farmers and their global export customers were staggered. “Demand for U.S. crops was pulled down by an inflated dollar as well as by high interest rates and low economic growth that precipitated a debt crisis and recession in importing countries,” noted a 1986 USDA report commissioned by Congress to examine the root causes of the calamitous 1980s farm crisis.
In the end, the report concluded, “Effects of export embargoes on the U.S. agricultural economy have been minor compared with the effects of changes in the global economic environment.”
But those facts couldn’t compete with farmers’ memories even then, noted the UPI newswire service in its Nov. 13, 1986 report on the USDA study. “The Carter Administration’s benefits to farmers and grain companies right after the embargo more than compensated farmers for losses caused by the embargo, the study said.”
Indeed, USDA explained, Carter’s swift actions raised farm income by $2.2 billion over the following four years.
Most farmers don’t remember it that way—even though Carter was one of them, a farmer.
History, however, doesn’t forget. That’s important as U.S. farmers face another trade-slamming White House action this summer, the Trump-imposed tariffs on America’s biggest farm and food customers, such as Canada, Mexico, China, and the European Union.
The muted reaction by farmers thus far—despite the June market smash-up in soybeans, corn, and live hogs—eerily mirrors farmers’ reactions that Prof. Paarlberg witnessed after the 1980 Carter Embargo. And, like he noted then, USDA is now readying CCC billions to prop up farm income.
History shows that farm trade standoffs are short-term arguments that can be handled. Their real and lasting problem, however, is when they become matches to ignite global economic fires. If that happens, everyone gets burned.
Even those who don’t study history.
© 2018 ag comm
You may not be hearing from the hundreds, maybe thousands of young farmers that LOST thier farms during these times. It’s hard for them to believe how good things were on the farm!