Governor Dolph Briscoe, who owns about 600 square miles of South Texas ranchland and leases another 800 square miles of grazing land, says this influx of alien investors doesn't worry him. "Texas was developed by foreign capital," the governor said early this year on the "Texas Weekly" television interview program. "For example, the ranching industry of the Panhandle in this state was developed by English and Scottish capital," he said. (In 1885. British companies owned, leased or occupied between 15 and 20 million acres of Texas ranchland. Most of these firms were financially ruined by the "Great Die-up" of cattle wrougbt by the dry summer of 1886 and the deadly winter of '87.) Another big business rancher, John Connally, agrees that foreign capital is welcome in Texas; indeed, the former governor and U.S. treasury secretary has traveled to Europe to urge business interests there to buy a piece of Texas, and he has also joined with Saudi Arabian interests in a Houston bank venture.
So much for who favors foreign investment. Average family farmers, whose existence is a bit more hand-to-mouth than Briscoe's or Connally's, are genuinely troubled by the specter of rich foreigners dabbling in their industry. The Texas Farmers Union, American Agriculture Movement, and Texas Farm Bureau have called for a thorough investigation to determine the full reach of foreign investors in the Lone Star state.
Farmers don't like these investments for much the same reason that the foreign interests do like them. It is important to keep in mind that the aliens are investors, not farmers -- they know and care little about farm techniques, conservation of the land, or even food production, and they do not really want to join struggling Texas farmers and ranchers in agricultural operations. Basically, they are cash-rich individuals or companies seeking a hedge against infiation and, in some cases, a refuge for their capital amid changing political conditions at home (in Italy, France, Quebec and some Arab countries, for example). They are lured to the U.S. in part because of our devalued dollar, and they are attracted particularly to Texas farmland because of its bargain price -- prime land runs about $1,000 an acre here, compared to $2,500 to $4,000 in the Midwest farm belt.
By burying their money in Texas land, these investors are producing several unfortunate results. First, they tend to greatly inflate the price of land -- a 1977 spot check by the General Accounting Office found that foreign buyers in Georgia were paying from $150 to $2,000 more per acre than were domestic bidders. Local farmers cannot hope to compete for available acreage against such spendthrifts, and rising land prices erect an imposing barrier against the entrance of young farmers into agriculture (the very people who historically have brought the latest innovations into farming).
Second, these extraordinarily rich foreigners are typically buying huge aggregations of land, concentrating ownership of farms in fewer hands, even as they increase farm size beyond any relation to true economies of scale. (In agriculture. efficiencies are achieved at a surprisingly small scale of operation, and the farm run by a single family has been shown in every study to be the most efficient unit of production.)
Third, the productivity, of the land acquired by these absentee landlords can be expected to decline, both because hired farm managers tend to be less diligent than farmers operating their own enterprises and because the distant investor has less attachment to the soil and less stake in its long-term productive capability.
Fourth. foreign-held operations can disrupt the local competitive balance among farmers, since the investors have bookkeeping and tax-law advantages not available to the Stan Swansons, who rely solely on farming for their living and who are not incorporated in the Netherlands Antilles.
The Keese proposal
Clearly, there is a phenomenon here worthy of scrutiny, and it draws attention to the larger need to know more about the changing patterns of ]and ownership in Texas. Dr. Ivan Schmedemann of Texas A&M's department of agricultural economics says that as long as hyperinflation plagues the world economy, the trend toward multimillion-dollar investments in Texas farming operations will continue. Furthermore, Schmedemann predicts that "the greater impact" will come not from foreign shores, but from "wealthy investors in this country who want to diversify their portfolios." It is not the foreign presence that is the threatening aspect of Texas' newest land rush, but the fact of absentee ownership.
Family farmers may soon see a working model of the future some have in mind for Texas agriculture. Western Land and Development Investment Corporation, a Colorado-based firm, is competing with a consortium of Japanese investors to buy a 5,000-acre tract (nearly eight miles square) out in the Panhandle. If WLDI wins the bidding war, it intends to divide the tract, provide irrigation, sell the developed land to a broker (reportedly Merrill, Lynch, Pierce, Fenner & Smith) for resale as "farms" to both domestic and foreign investors, then provide farm management service for the absentee owners.
Whether or not it is in the public interest to combat these farmland speculators, at least we ought to know what they are doing and where. Currently, however, no state agency compiles~ information on land ownership -- not the Department of Agriculture, the General Land Office, or the Comptroller's Office. National data are not much better, although the Congress's General Accounting Office is investigating foreign ownership of farmland in nine states, including Texas, and the Department of Agriculture has a "survey of ownership" underway that is supposed to provide the first national statistics on the age, sex, nationality, race and income of landowners. The survey report is due by October of 1979.
Of more immediate importance to Texans is a proposal by Rep. Bill Keese of Somerville to amend state law governing corporate reports so that they would include information about corporate agricultural landholdings. Keese will introduce a bill in January to require corporations engaged or proposing to engage in farming, as well as corporations owning or leasing Texas farms and ranches, to report annually to the secretary of state the size, value and location of that land. In addition, the bill requires the firms to provide a name-and-address list of their officers, board members, and any sharebolder owning 10 percent or more of the total stock.
Then, at least, we'd have some idea of the true ownership situation in rural Texas. The truth may not make us free, but it might make us mad -- maybe mad enough to do something about it.
In 1978, Harris Worcester was a doctoral candidate at Princeton University.