Our family was sitting around a table at Culver’s recently. Somehow, inflation came up. And because we’re farmers, the ’80s. Which led 17-year-old Nathan to inquire, “So, what actually happened then? What made the ’80s so bad?”
We explained, as best we could.
Roger McEowen does it better. McEowen is an ag law and tax professor at Washburn University in Kansas, and he offered up this explanation at the recent American Farm Bureau Federation convention.
McEowen’s history lesson
By the summer of 1979, the country was dealing with staglation: high inflation coupled with high unemployment. And in August 1979, Paul Volker was appointed chairman of the Federal Reserve and came into office determined to “wring inflation out of the economy.”
“How do you wring inflation out of the economy if you’re chairman of the Fed?” McEowen asked, and answered: “You jack interest rates up.”
That sent a signal to the economy — and to agriculture. Ag policy had encouraged expansion through the ’70s. The U.S. was opening up export markets so farmers could sell ’round the world, and U.S. Ag Secretary Earl Butz told farmers to “plant fencerow to fencerow.”
To do that, farmers had to expand. To expand, they had to borrow money. And a lot of them had variable rate interest — far more than today, McEowen explained.
So, when Volker and the Fed raised interest rates in late 1979, it worked in the sense that inflation came down. But land values also collapsed. In one 18-month period, Iowa land values plummeted 50%.
McEowen put it this way: “So, if you followed the policy USDA encouraged you to, you borrowed a lot of money. You were leveraged, but you were OK because your land values were high. Then all of sudden, your debt was high and your land values were low.”
Farmers were upside down. It was a bloodbath. And the ’80s farm crisis was on.
I’ve made it a point of asking farmers over the years — especially Master Farmers — what got them through the ’80s. What did they do right during a time period that was perforated with farm sales?
Time and again, they say they were cautious and lucky.
Iowa farmer Carl Hill once shared, “The time to be cautious is when the stick is going up. You don’t have time when the stick is coming down. You’ve got time to plan now. You can’t get yourself out once disaster hits.”
Georgia farmer and AFBF President Zippy Duvall explained that when he came home to farm in 1977, his dad wanted him to be able to farm but didn’t plan to give him anything, so “he sold me everything that moved.”
Then came the ’80s. “I said, ‘Dad, I can’t make this payment.’ He’d let me just pay interest that month,” Duvall recalled. “If it hadn’t been for his creativity, I don’t know that I would’ve survived.”
Then back in 2018, I sat around the kitchen table interviewing Master Farmer Fred Reichert, who was, frankly, no spring chicken at the time but was the sharpest and most spry 86-year-old you’re likely to meet. He grinned and told me, “Farmers don’t retire, they just die. I’d rather die in a tractor seat than in a La-Z-Boy.”
Fred had some regrets, as most of us would have by that age. He said he regretted not buying an 80-acre farm right across the road from another 140 acres he owned. But then he lifted his head, looked out the window and shook it the tiniest bit.
“He who hesitates is lost, but I figure there’s another side,” Fred said. “Sometimes, you’re damn glad you hesitated.”
As it turns out, Nathan had heard his dad talking to another farmer about inflation earlier this winter, and about the ’80s. He wonders about inflation, about what’s being done so that won’t happen again. About what might happen that no one saw coming, about the unintended consequences of another government policy.
But to every young farmer, those same farmers who made it through the ’80s preach optimism, too. FFA members learn the creed on purpose: “I believe in the future of agriculture with a faith born not of words but of deeds … in the promise of better days through better ways ...”
And maybe that’s the lesson. Plan. Be cautious. Pay attention to policy and economic indicators. Pray for a little luck. And keep looking ahead.
What got you through the ’80s? Email email@example.com.