User:Inframek/Parity (raw materials economics)

Parity traces back to the Latin words "parium" and "paritas," which mean justice and equality, or a condition of equilibrium. Parity (raw materials economics) is when raw materials enter trade channels at prices in balance with the prices of labor and capital.

In the 18th century, a group of French economists, doctors, and business owners called the Physiocrats first brought the concept of parity into the arena of economics. They concluded that trade and industrial commerce changed the form and location of wealth, but not the amount of wealth in existence. Thus, trade and commerce were necessary spin-offs of original raw material wealth production as technology increases the efficiency of raw materials usage.

In the last decade of the 19th century, William Jennings Bryant and the Populists brought the parity concept into the debates on American monetary reform.

In 1921, professor George M. Warren officially brought the parity concept into agricultural policy debates in the form of USDA Bulletin 999, Prices of Farm Products in the United States. Warren was first to compare the movement of farm gate prices, as published by the USDA, to the other segments of the domestic economy.

George Peek of the Moline Plow Company later popularized the parity concept. Peek became a strong advocate of the McNary–Haugen Farm Relief Bill, proposed federal legislation which would have established the first national system of price supports for agriculture.^[1] Eventually in the 1930s, New Deal federal farm programs incorporated parity as part of those programs.

The health, robustness, and sustainability of the American economy is directly tied to the production of raw materials and the price at which those raw materials first enter into commercial channels.

• When raw materials enter trade channels at prices in balance with the prices of labor and capital, parity, the economy operates on an earned-income basis with no buildup of public and private debt.
• Conversely, when raw materials enter trade channels at less-than-parity prices with labor and capital, the economy lacks sufficient earned dollars to operate on an debt-free basis, therefore, public and private debt accumulates.

It can be proved from the record that for each one percent that farm prices are below parity, there will be

• one percent unemployment
• one percent loss in factory production
• one percent loss in National income.

It is not a theory, but is a fact, in the same manner as an audit of a business.

When the nation's production of raw materials from its farms, ranches, timberlands, oceans, mines, wells, and recycling centers first enters into trade channels at prices in balance with the costs of labor and capital, parity, then the U.S. economy

1. will operate at virtually full employment
2. debt expansion will cease
3. public and private debt will shrink
4. interest rates will decline and stay low
5. inflation will be nil
6. will have sufficient taxes collected to balance governmental budgets at all levels.

This much can be proved from official government statistics. Fred Lundgren and Jerome Friemel wrote a book, The Nature of Wealth^[2], that is currently out of print and available online. The book provides mathematical proof of the parity concept.

Parity and NORM

In the 1930s Carl H. Wilken began analytical studies of the economic records of the U.S. government to find out what really caused the Great Depression and to determine if a future depression could be prevented.

To continue his work Wilken founded the Raw Materials National Council, which was eventually succeeded by the National Organization for Raw Materials (NORM). This analysis of the U.S. economy differs from mainstream economic analysis. It is not predicated upon any "economic theory" such as "Keynesian," "supply-side," "trickle-down" or "monetarist."

Wilken, along with Dr. John Lee Coulter, Fargo, ND, Dean of North Dakota State University's agricultural programs, and Charles B. Raw, Chicago, an engineer for Sears, Roebuck & Company, discovered the formula behind the 1-1-7 ratio. This formula states that $1 of gross farm income generates $1 profit and savings in the economy and $7 of national income in the economy on an earned basis.

Educational efforts by Carl H. Wilken and other members of the Council, along with the States Commissioners and Secretaries of Agriculture, led to the passage of the so-called "Parity Laws" in 1941, which remained in effect from 1942 through 1952.

Parity and the Great Depression

The Smoot–Hawley Tariff Act often has been blamed for the depression because it blocked the exports of farm products. The simple facts are that we had none to export except cotton and a little wheat. Cotton, our principal export crop, did not suffer from the Smoot–Hawley Tariff Act.

The record of the U.S. Department of Agriculture reveals that in 1930, the year the bill was passed, our cotton exports were seven million bales and in 1931, the year after the bill was passed, our exports were nine million bales and in 1932, the year of the deepest depression we exported 8.8 million bales. The years 1931 and 1932 were two of the best years of cotton exports in the history of the United States.

It was low prices that caused the Great Depression and tariffs had little to do with it.

The Birth of Raw Material Economics

by Charles Walters

The birth of raw material economics, while ancient in origin, has been credited to Benjamin Franklin, the Philadelphia philosopher, printer, and statesman, and to Thomas Jefferson, who as a historian once wrote “invented the United States.”

Although Jefferson gave a published expression to the concept of raw material economics, it was Franklin who sat down the general proposition in concise and understandable terms.

Writing in Positions To Be Examined Concerning National Wealth, April 4, 1769^[3], Franklin pointed out that there were three ways in which a nation might become wealthy:

1. By war, which permits taking by force the wealth of other nations;
2. By trade, which to be profitable requires cheating. For example, if we give and receive an equal amount of goods and services through trade, there’s no profit other than that obtained in our own production cycle.
3. By agriculture, through which we plant the seeds and create new wealth as if by a miracle.

Raw material production times the price of first entry into trade channels has the following effects:

• The raw materials supply determines the number of jobs available in fabrication, processing, and use from raw materials production to manufactured products and distribution.

• The dollar value put on this new wealth raw materials production determines the amount of money which can and must be used to produce, buy, and move all the raw materials through the economy. As various costs are added, chiefly labor and capital costs, the add-on factors pyramid themselves into national income.

• The value placed on raw materials automatically becomes the initial market (total number of earned dollars available) for the exchange of the manufactured goods. It also defines the level of profits and savings for the economy. During several periods in this century, when the U.S. economy enjoyed full employment and controlled debt expansion, fully half of the market for manufactured goods remained in rural America, where they were created via the production, transport, processing and consumption of raw materials into trade channels.

Starting in the 1920s and going through the 1960s, several entrepreneurial gentlemen of profound knowledge and inquisitive nature about macro-economics became the “Founding Fathers of Raw Material Economics.” They re-examined the Franklin-Jefferson principles by researching and analyzing the nation’s economic records. Their findings are summarized above.

Those “Founding Fathers” were: Charles B. Ray, Carl H. Wilken, Dr. John Lee Coulter and J. Carson Adkerson. They were ably followed by such stalwarts as Arnold “Red” Paulson, Vince Rossiter, Merle Willard, Kermit Couch and others.^[4]

References

Resources

Raw Materials Economics- Read It, Learn it, DEMAND IT! The transcript of remarks by Mr. Carl H. Wilken before the 25th annual meeting of the National Association of Commissioners, Secretaries and Directors of Agriculture. This meeting took place November 29, 30, December 1, 1943, at the Statler Hotel, St. Louis, Missouri.