ShipOfFools_web_07292016“Two are better than one,
because they have a good reward for their toil.
For if they fall, one will lift up his fellow.
But woe to him who is alone
when he falls and has not another to lift him up!”
(Eccl 4:9-10)


By Stephen W. Hiemstra

When I landed in the Finance and Tax Branch in Rural Economy Division (RED) in 1986, carryover work kept me busy for a number of months. Because of a thorough review process and a team of competent editors, carryover publications could take months or even a year to finish up. Still, I needed to get busy on the work of the new branch and earn my stripes in finance.

Although I had not been trained in technical finance, finance and the mechanics of trade worked hand-in-hand to affect agricultural exports. More importantly, U.S. agriculture required substantial investments in land, resources, and infra-structure that left it sensitive to changes in the financial environment. It’s funny—I never considered myself a derivatives expert, but my first lecture as a teaching assistant at Cornell University was explaining to my students in a retailing class how farmers could hedge their soybean crop in the futures market. I knew more finance than the typical economist, in part, because of my agricultural training.

My insight into the financial sensitivity of agriculture led me to have second thoughts about the Reagan Administration’s policy objective of dismantling agricultural support policies, particularly for grains and oilseeds, at a time in the mid-1980s when interest rates were both high and volatile—exchange rates were also volatile during this period and poorly understood in terms of their implications for agricultural trade. Rates of return on investment in land, for example, were about 1 percent during those years, yet interest rates had risen into the double digits as the Federal Reserve worked to tame inflation. Farm families were having trouble passing their farms onto a new generation, both because of these high interest rates and plummeting prices of grain. If price supports were then also removed, many farm families would be run out of business even faster than was already happening. In so many words, the Reagan policy seemed out of touch with their own republican base (most farmers at the time were republicans) and contrary to USDA own mission statement, as frequently and publicly espoused.

As I watched all this going on, I found myself repeating a rant about the financial implications of the Reagan policy initiative, even before I joined RED. After a while, I realized that this rant was both a real concern and could make a good policy analysis paper. Writing a paper critical of the policies of a sitting president was not, however, something to take lightly. In consulting with sympathetic colleagues, I was encouraged to go ahead and write the study. It was a relatively short paper with the title: Monetary Implications for GATT Agricultural Negotiations.

Because I had changed divisions in ERS, a finance paper would be reviewed by managers in RED, not International Economics Division (IED) where the policy implications would be more obvious. This meant that the paper would not be on people’s radar system during the review process and might potentially be published before critics would pay any attention—even if I offered to let them be reviewers!2/ It was important, however, to have administrative support when the critics finally woke up and began to raise questions.

My administrative support came in the form of a co-author. A friend and mentor had recently been promoted into a high visibility administrative position. He supported my critique and encouraged me to write the paper. In return, he became a co-author.

When my paper hit the news stands, the Reagan supporters went nuts and argued that the paper should be retracted from publication. A meeting was held; objections were noted; the paper went forward. In fact, the paper was so popular that it had to be reprinted twice. I was also invited to be a keynote speaker at a national conference with 6,000 in attendance[1] the week before the 1988 presidential election—I thought that my branch chief would pass out when I told him. As it turned out, that invitation was kicked up to the Secretary of Agriculture never to be heard from again.


Hiemstra, Stephen W., and Mathew Shane. Monetary Implications for GATT Agricultural Negotiations. USDA. ERS. Foreign Agricultural Economics Report No. 236. April 1988. (Revised reprint August 1988). 20 pp.

[1] My recollection was that it was the National Water Resources Association (

[2] As a mere economist, it was hard recruiting reviewers.

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