The Reagan Years in the Midwest: 'No Day at the Beach'

I started a small business in November 1987 when women-owned businesses were not very prevalent. At first, local Illinois banks would not lend to me unless my husband co-signed. Money was tight in the Reagan years, just as it is now. We had a very difficult time borrowing $20,000 (of a $65,000 start-up amount), even though my (female) partner and I were each putting in a matching amount ($20,000) from our own savings.

Ultimately, Southeast National Bank of Moline took a chance on two ex-teachers who wanted to open a learning center -- the second Sylvan Learning Center in Iowa in Bettendorf. We opened on Nov. 15, 1987, and the business still exists today.

My partner and I parted ways after the summer, and I went on alone. For three years, I did not take a salary. I had no teaching staff, other than myself, and I remember that it took $800 a month just to keep the doors open and the lights on. With only a few paying customers, as a new business, I was struggling.

The farm crisis was hitting the Midwest hard. Times were tough for farmers, and because we lived in a rural area, times were tough for me, too. For every farm job that was lost, three non-farm jobs would be affected. A farmer killed his banker, neighbor, wife and himself in Hills, Iowa. Two bankers in Ruthton, Minnesota, were killed by a farmer and his son while the bank tried to foreclose on the family farm. Stories like this played out across the land. Bank foreclosures were up and farm values plummeted in a boom-and-bust cycle. Exports of Farm exports declined and prices fell.

My father was a banker who had grown up on a farm, one of eight farm children. He was still alive in the early 1980s and astounded at what was happening to the family farm, partially as a result of "a confused (Reagan) administration policy that remained largely unchanged from those of previous administrations," according to author Jason Manning.

The same effect we have seen recently with the housing bubble that burst in 2007-08 was seen when the farmland value bubble burst in the Reagan years. Conveniently low interest rates persuaded many farmers to go deeply into debt, assuming that commodity prices and land values would continue to rise. They it did not.

Although farm household income was below the national average in the 1960s, in the 1970s it was higher than the national average every year except one. But the agricultural "boom" didn't last long, just as the housing boom didn't last long, and income levels dropped, leaving many small farmers deeply in debt and in danger of losing the family farm, sometimes a farm that had been in the family for generations.

It started with President Carter's grain embargo against the USSR to punish them for invading Afghanistan (we simply lost those markets to other countries).

"The worst nonsense of all...was farm subsidies," said government spokesman Stockman. "The nation's agriculturalist were never the same after the New Deal turned the wheat, corn, cotton, and dairy business into a way of life based on organized larceny."

Reagan's first budget attempted to slash all farm subsidy programs. This did not set well with Southerners who fought back. Ultimately, we ended up spending six times the $10 billion we had been spending over the next 5 years. Farm Aid became active, helping farmers organize to fight the demise of their way of life. Fifteen hundred delegates from thirty-eight states met in St. Louis in 1986 and protests were organized by the North American Farm Alliance from headquarters in Ames, Iowa (home to Iowa State University). Farmers would not go gently into that good night of bankruptcy, as illustrated by many violent acts and many protests.

Farmers opposed the Reagan administration's twin goals: reduce price supports and lower trade barriers. Ken Kreego of AAM said, "We can't compete with a water buffalo and a grass hut." Foreign products almost always undersold American products, just like China does today, and farm production costs had increased by 64 percent while increases in prices had increased by only 37 percent. Farmers were getting only 28 cents of the retail food dollar. Farmers experienced a 36 percent drop in farmers' profits, while consumer food prices rose 36 percent between 1980 and 1988.

ON THE LOCAL FRONT...

On the local front, when farm prices are down and farmers are going bankrupt, they don't buy expensive replacement heavy machinery like tractors and threshers. My husband worked for John Deere for 36 years. Deere experienced some bad times but was big enough to weather them. For International Harvester ("Big Red") which had been a major employer in our area for decades, it was the beginning of the end. IH became Case IH and a huge plant that sits on the banks of the Mississippi, less than one-half a mile from my home in East Moline, eventually closed, throwing thousands out of work.

For me, as a new small business owner in Bettendorf, Iowa, the fact that the Bettendorf Case IH plant went down, was horrible timing. It required severe sacrifice and much self-discipline to wait out the 1980's and become a profitable small business with 50 employees.

NO DAY AT THE BEACH

Perhaps some who lived in other parts of the country remember "days of wine and roses" in the wonderful Reagan years, but I remember the way it really was in the 1980s in the Midwest. In 1985, the government's articulated policy was "laissez faire": "The primary function of the government should be to insure small and moderately-sized farmers against natural disasters, price fluctuations, but the government cannot protect farmers either from themselves or from inevitable changes in technology and the marketplace." And, after saying that, the government pretty much let farmers sink -- or swim. Many farmers needed water-wings, and Reagan's policies weren't much help in that department.

To say it was no day at the beach in the Midwest in the Reagan years is both geographically correct and fiscally correct, from my point of view as a small business owner and entrepreneur who weathered that storm and remained in business from 1987 until selling in 2002.