The Role of Support Prices in a Full-Employment Economy

Abstract

In both Canada and the United States the agricultural programmes that attempt to support or raise the level of farm prices were conceived during the inter-war period of readjustment and depression. Now that we have had ten years of full employment and high-level incomes in our respective economies, it is perhaps time to reassess the role of support prices.The reassessment that I propose to make is based on the assumption that we will be able to maintain full-employment economies most of the time and that if a depression should come, it will be relatively mild and of reasonably short duration. Fear of war, war, and preparation for war are likely to lead to a full-employment economy for some time. It may not be too much wishful thinking to believe that if the happy era should come when war no longer serves as an impetus for aggregate demand, our economies will be guided by competent monetary and fiscal leadership and will be able to maintain a fairly even keel. The mild recession which the United States experienced in 1949 and which had almost ended before the fateful attack in Korea offers some support for, though obviously not confirmation of, this view. In any case, we should clearly separate in our thinking and in our actions the problems of agricultural price policy as they relate to conditions of full employment and to conditions of depression.