Manipulating Wages and Prices Via "Free" Trade & Our Money Supply System
A short synopsis:
Dumping of tea by the British East India Company before the Revolutionary War was not the only example of the damage to the wage and price structure within a local economy that “cheating” trade practices can do. This is how one Revolutionary War contemporary by the name of George Mann described what happened immediately after the Revolutionary War - between 1783 and 1789:
As there was no tariff to prevent it, foreign nations poured in their products of every kind and description in such quantities and such prices that our people could not compete with them. Domestic industries were suspended. The weaver, the shoemaker, the hatter, the saddler, the rope maker and many others were reduced to bankruptcy. Our markets were glutted with foreign goods. Prices fell, our manufacturers were generally ruined, our laborers beggared, our artisans without employment, our merchants insolvent and our farmers followed all the classes into the vortex of general financial destruction. Depreciation seized upon every species of property. Legal pressure to enforce payment of debts caused alarming sacrifices. . .
Now for some examples of manipulation of farm prices,
In 1866, per USDA figures, the average price of a bushel of wheat was $2.06. Through various acts of Congress - including the Contraction Act of 1866, the Credit Strengthening Act of 1869 and the Demonetization of silver in 1873 - to contract the money supply, wheat prices fell until they reached a low of 49 cents a bushel in 1894. These were the years that the “foreign syndicate,” referenced by America's greatest monetary historian Alexander DelMar, and their allies in Congress were touting gold as the only sound money, hence the purported need to phase out the Greenback; require debt to be paid in gold; and demonetize silver. During many of these years the price of butter and eggs dropped to ZERO. Farmers were alternately told they weren’t producing enough to pay off their debt, then they were told they had produced too much, creating a surplus which they were told was the cause of lowered prices. Populists said wait a minute - if there is a surplus then why are thousands of children starving in the streets and why are shop girls required to sell their virtue for a slice of bread? They demanded government-issued money.
Regarding the "foreign syndicate" referenced above, it is worth mentioning here that when the First Bank of the United Stetes was dissolved in 1811, after a long and hard-fought battle, it was found that 18,000 of the bank's 25,000 shares were owned by foreigners, mostly English and Dutch. So it seems that although the Revolution was fought to end foreign domination, it was being re-insinuated through the banks.
William Jennings Bryan, the putative "pro-silverite" who was endorsed by Alexander Del Mar, discussed the deliberate contraction of the money supply and the afore-mentioned "foreign syndicate" in a campaign speech delivered in St. Louis on an excrutiatingly hot night in September of 1896 to an enthusiastic crowd of 20,000:
First Bryan provides Treasury Department figures for the money supply, saying that in 1894 the per capita money in circulation was $24.28 in 1894 and had fallen to $21.28 per capita - or more than $3 by 1896. Then he talks about the Republican convention during which the Republican Party “pledged to get rid of the gold standard and substitute bimetallism as soon as the leading nations of Europe would help us to do so.” Then he goes on to say that "these men who tell you that everything would be all right if you would just have a quiet settlement of the money questions, and then do not tell you what the quiet settlement is, or if they know they are unwilling to tell us. You will find some of these banking institutions – I do not say all of them, because there are in the banking business men who will respect the Constitution and laws of the United States
– but I say some of these banking institutions tell a man they will not lend money to him nor extend his notes unless he votes as they ask him to."
Bryan continues: "Yes and why do they do it? It is because there are banking firms in New York City who tell the banks that if they do not do as they want them to they will not extend credit to them, and then there are banks in London who tell the banks in New York that if they do not run the United States in the European plan they will not extend credit to them. I wonder if those who are assembled here know what is going on under the financial policy which has cursed this country for the last 20 years. Let me tell you some things. They have presented greenbacks and Treasury notes for redemption, and instead of the Government exercising the right to redeem these greenbacks or Treasury notes in either gold or silver, the present Administration and the Administrations of several years past have surrendered that right to the holder of the note, and under that right the Treasury of the United States has proved helpless in the hands of those who, pretending to uphold the Nation’s credit, have plundered the Nation to fill their own pockets with the people’s money.”
A rebuttal from a spokesman for the "American Honest Money League" by the name of Carl Schurz, took aim against Bryan, saying in part: What has Europe done to “subjugate” us”? Nothing absolutely nothing, but lend us money.
During World War I, the United States went from being a debtor nation to a net creditor by the war's end, thanks in no small part to the creation of the Federal Reserve System. New York surpassed London as the center of the world capital market, a dubious achievement at best, because as in London, said "capital" was not really a fount of capital but rather a fount of credit built on the savings of ordinary Americans.
By 1919 wheat prices “peaked” at $2.16 a bushel, after which the Fed moved to stop “inflation” by raising interest rates from 2% to over 9% within a period of 8 months, causing wheat prices to fall by more than half yet again and touching off a massive wave of farm bankruptcies and small rural bank failures. (Recall that raising interest rates is one way to contract the “money” supply within our current credit-as-money monetary system.)
Fast forward to the Great Depression when overvalued stocks driven up by speculation and funded by debt crashed the market – setting off another massive wave of bank failures nationwide. Wheat prices dropped to 38 cents a bushel and farmers began dumping milk in the streets and burning crops in protest because they could not even sell them - this while bread lines formed in cities all across the country. Instead of demanding monetary reform as their Populist forbearers had, these farmers begged Congress for relief, and got a bunch of bandaid programs that did NOTHING to solve the long term problem. But in 1942, in the war emergency, Congress agreed to a farm parity program, this at the determined urging of the Raw Materials Council, headed up by Carl Wilken and his team of experts. Unfortunately this program expired in 1952, attended ever since by ever-escalating debt.
Fast forward to the WTO and how it affected agriculture, this per Chalmers Johnson in Sorrows of Empire, pages 268-271:
What began as a poorly conceived program of emergency measures for debtor countries in the early 1980’s slowly matured into the hard orthodoxy of the “Washington consensus” in the 1990’s. The United States government became determined to impose neo-liberal economics on every country on earth. To do so, it unveiled its master plan at the “Uruguay Round” [which then became the WTO]. It should be understood that there was no need to create the WTO. There was no crisis in international commerce between 1986 and 1994 that required rectification. International trade was expanding nicely under the GATT formula.
The WTO was created because the U.S. discovered that it could be created. Concretely, it had two objectives: to try to manage the growing trade rivalry among the leading industrial countries, especially the U.S., the EU, and Japan, and to ensure that the third world was prevented from using trade as a legitimate instrument for its industrialization, thereby threatening the neo-liberal global economic structure.
The U.S. achieved the latter objective through the Agreement on Agricultural and the Trade-Related Intellectual Property Rights Agreement [TRIPS], two of the pacts that the Uruguay Round delivered in 1995 to the WTO to enforce. . .Prior to the WTO, agriculture had for all intents and purposes been outside the purview of GATT because the US had long threatened to withdraw if it was not allowed to continue producing domestic sugar, dairy products, and other agricultural commodities. To head off an explosion, GATT simply decided not to enforce any rules on agriculture.
By the 1970s however, Europe had become a net food exporter, and competition between the two agricultural superpowers, the EU and the U.S. was growing fiercer than ever. Both wanted to force open the third world as a new market for agricultural exports. To do this they had to put the farmers of poor countries out of business and replace them with giant agribusinesses. In the Uruguay Round of agriculture, the EU and the U.S. excluded all representatives of the third world and agreed between themselves on rules covering agriculture. In the Blair House Agreement of 1992-93, they prohibited the third world from protecting its agriculture but exempted their own subsidies because these were already in place before the agreement was concluded.
Unsurprisingly, a large surge of agricultural imports then poured into developing countries without a commensurate increase in their exports. This intrusion produced a flight into third world cities by displaced agricultural workers, an ever-greater concentration of land holdings, and a marked rise in rural violence as local farmers tried to protect their way of life. . .
The result in the First world was the overproduction of a vast range of agricultural products, including cereals, beef, pork, milk, butter, tomatoes, sunflower oil, and sugar. These commodities were then unceremoniously “dumped” in developing countries. Joseph Stiglitz’s conclusion is unavoidable: “The well-to-do countries that officially praise free trade, frequently use tariffs and subsidies to limit imports from poor countries, depriving them of the trade they need to relieve poverty and pursue their own economic growth. . .”
With regard to agriculture, the TRIPS system has for the first time given corporations the right to patent life-forms, particularly seeds. . . Monsanto is a major player in the corn and soybean markets in North America, Latin America, and Asia and in the European wheat market; one of the ways it and other companies, such as Novartis and DuPont, use the TRIPS system is to develop and patent genetically modified plants that will not produce seeds for succeeding years’ crops and that must be fertilized with expensive products made by those same companies. These corporations are thus in a position to extract monopoly profits from poor countries by dominating their agricultural sectors and dictating what they will eat, if they eat at all. . .
Another abuse of the TRIPS system has come to be called “biopiracy”. In this practice, some firms and universities obtain patents on plants that third world countries have know about and used, often for centuries, and then extract royalties if these countries want to continue growing them.
Suggested read: Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang. Also the online American Babylon, especially Chapter 5: The Triumph of the Merchants.
You might also want to read this article for some additional context that connects trade to the money system and this one showing 20 facts showing how NAFTA is destroying the economy, plus similar articles. This 1990 article is by former Minnesota Secretary of State Mark Ritchie, called "Trading Away the Family Farm: Gatt and Agriculture."
Learn the real deal about what's eating American farmers today.
You might also be interested in some of the articles that appeared in the now defunct Touch the Soil publication, produced by AMI member Ben Gisin and his wife Susan, who have 50 years of combined banking experience between them. Ben had served as a senior agricultural credit approval officer for the nation’s 7th largest agricultural bank. After he and his wife left banking they spent 10 years consulting distressed family-farms, negotiating debt settlements and lecturing on family farm advocacy and the monetary system. They were the former publishers of Touch the Soil magazine. Be sure to read Farmland (A Casualty of the Financial Crisis. Another article titled Time to Think Farming (to solve the economic crisis) mentions NORM in the context of establishing "cash flow for the economy".