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Export, Die, or Subsidize: The International Political Economy of American Agriculture, 1875–1940

Published online by Cambridge University Press:  03 June 2009

David A. Lake
David A. Lake
Affiliation:
University of California, Los Angeles
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Extract

The agricultural policies of the New Deal persist to the present day and are a particularly important turning point in the history of the American farm sector. In the period from 1875 to 1940, agricultural policy evolved from a strategy of exporting the domestic surplus, to shrinking production through attrition in the farm population, to subsidizing production and restricting acreage. Although rooted in farm demands upon the political process, this evolution was ultimately driven by both foreign demand and the alternative employment opportunities available to American farmers.

Type
The United States in the International Economy
Information
Comparative Studies in Society and History , Volume 31 , Issue 1 , January 1989 , pp. 81 - 105
Copyright
Copyright © Society for the Comparative Study of Society and History 1989

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References

Earlier drafts of this paper were presented at the 27th Annual Convention of the International Studies Association, 25–29 March 1986, Anaheim, CA; and the 1986 Annual Meeting of the American Political Science Association, 28–31 August, Washington, D.C. I am grateful to David Balaam, Jeffry Frieden, Jeffrey Hart, Wendy K. Lake, Karen Orren, Robert Paarlberg, and Michael Wallerstein for comments. I would also like to acknowledge the research assistance of Scott James and Bess Karadenes and the financial support of the Academic Senate of UCLA.

1 See Edward, L. and Schapsmeier, Frederick H., Henry A. Wallace of Iowa: The Agrarian Years, 1910–1940 (Ames: Iowa State University Press, 1968)Google Scholar; and Fite, Gilbert C., N, George. Peek and the Fight for Farm Parity (Norman: University of Oklahoma Press, 1954).Google Scholar

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3 See, for instance, Talbot, Ross B. and Hadwiger, Don F., The Policy Process in American Agriculture (San Francisco: Chandler Publishing, 1968)Google Scholar; Campbell, Christiana M., The Farm Bureau: A Study of the Making of National Farm Policy, 1933–1940 (Urbana: University of Illinois Press, 1962)Google Scholar; and Peterson, Trudy Huskamp, Agricultural Exports, Farm Income, and the Eisenhower Administration (Lincoln: University of Nebraska Press, 1979).Google Scholar

4 In the absence of artificial restraints, supply cannot exceed demand; if supply increases more rapidly than demand, prices will simply decline. By oversupply or surplus, I mean that supply is too large relative to domestic demand to sustain a price that makes farming profitable under current factor endowments and technology. The condition of oversupply in the United States was originally generated by many factors, including strong foreign demand for United States products as well as the perceived attractiveness of farm life.

5 There is a natural tendency for the farm population to decline as countries industrialize. As cities and manufacturing sectors grow, labor is attracted away from agriculture. Simultaneously, the remaining farmers may begin to employ more intensive agricultural techniques, thereby increasing their productivity. Up to a point, this process is self-generating; shrinkage induces improvements in productivity, which, in turn, displace additional farmers.

6 The process of shrinking output through population attrition clearly has differential effects within the farm sector. For the remaining more efficient and more competitive farmers, the agricultural surplus will be smaller and incomes, for them, correspondingly higher. For these lucky farmers, this is a route to relative prosperity. There are considerable private and social costs—related to the state of the macroeconomy—for the farmers who are dislocated. If alternative means of employment for these farmers are scarce, their incomes may fall dramatically. In addition, while the incomes of the remaining farmers will be enhanced, the income of the agricultural sector as a whole may actually be reduced.

7 To succeed, production controls must be mandatory. Under typical conditions, farmers will not voluntarily agree to restrict production to reduce surpluses. Voluntary restrictions confront a classic large-n prisoners' dilemma: each fanner prefers to maintain production, while others reduce theirs, even though all farmers would gain from cooperation. As a single farmer's cutbacks cannot appreciably affect the surplus, while reducing output, if others do not, can spell bankruptcy, the temptation to defect is overwhelming. If a farmer believes others are reducing their production, he will increase his own. Thus, mandatory restrictions are necessary to impose cooperation. Even here, the incentives to cheat are high. Farmers therefore require minimum price supports or direct cash subsidies, which act as a form of income insurance against cheaters, as the price of their compliance with mandatory crop restraints. Subsidies and mandatory production restraints, then, are mutually reinforcing. Restraints are necessary to limit payments to farmers; subsidies are required to gain farm compliance with reduced productions levels.

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10 Among others, see Goodwyn, Lawrence, The Populist Moment: A Short History of the Agrarian Revolt in America (New York: Oxford University Press, 1978).Google Scholar

11 Benedict, Murray R., Farm Policies of the United States, 1790–1950 (New York: Twentieth Century Fund, 1953), 94.Google Scholar

12 See Terrill, Tom E, The Tariff, Politics, and American Foreign Policy, 1874–1901 (Westport: Greenwood Press, 1973), 18Google Scholar; and Williams, William Appleman, The Roots of the Modern American Empire: A Study of the Growth and Shaping of Social Consciousness in a Marketplace Society (New York: Random House, 1969), 106.Google Scholar

13 Benedict, , Farm Policies, 133.Google Scholar

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15 Benedict, , Farm Policies, 85.Google Scholar

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17 Benedict, , Farm Policies, 85.Google Scholar

18 With the closing of the frontier and the expansion of urban centers, land values also began to climb, increasing the net worth of farmers and enabling them to borrow more easily in times of crisis or for improvements.

19 Campbell, , Farm Bureau, 3–7.Google Scholar

20 See Lake, Power, Protection, and Free Trade, ch. 4.

21 Fite, , George N. Peek, 10Google Scholar; Benedict, , Farm Policies, 168–69.Google Scholar

22 Benedict, , Farm Policies, 169.Google Scholar

23 Ibid., 168–72.

24 See Taussig, Frank W., The Tariff History of the United States, 8th ed. (New York: G. P. Putnam's Sons, 1931)Google Scholar; and Saloutos, Theodore and Hicks, John D., Agricultural Discontent in the Middle West, 1900–1939 (Madison: University of Wisconsin Press, 1951).CrossRefGoogle Scholar

25 See McConnell, Decline of Agrarian Democracy, and Campbell, Farm Bureau.

26 Fite, , George N. Peek, 169–84.Google Scholar

27 Ibid., 137.

28 Schapsmeier, , Henry A. Wallace, 104.Google Scholar

29 Quoted in Fite, George N. Peek, 164.

30 Benedict, , Farm Policies, 179.Google Scholar

31 For a good summary of the issues and policies involved in the American stabilization effort, see Leffler, Melvyn P., The Elusive Quest: America's Pursuit of European Stability and French Security, 1919–1933 (Chapel Hill: University of North Carolina Press, 1979).Google Scholar

32 See Saloutos, and Hicks, , Agricultural Discontent, 290–91.Google Scholar

33 Fite, , George N. Peek, 135.Google Scholar

34 Quoted in ibid., 83.

35 Schapsmeier, , Henry A. Wallace, 118.Google Scholar

36 U.S. Department of Commerce, Historical Statistics of the United States: Colonial Times to 1970, vol. I (Washington, D.C.: U.S. Government Printing Office, 1975), Series C76–80, p. 96.Google Scholar

37 See Saloutos, and Hicks, , Agricultural Discontent, 109.Google Scholar

38 Fite, , George N. Peek, 203–42.Google Scholar

39 Condliffe, J. B., The Commerce of Nations (New York: W. W. Norton, 1950), 481.Google Scholar

40 Lipsey, , Price and Quantity Trends, 158.Google Scholar

41 Saloutos, and Hicks, , Agricultural Discontent, 413–14.Google Scholar

42 Finegold argues that the farm organizations did not really support Roosevelt's initial policies. Rather, the principal advocates were “agricultural experts” from the Department of Agriculture and the land grant colleges. The greater prominence given to experts in the Roosevelt Administration helps explain the different policy preferences of the Hoover and Roosevelt administrations. Yet, too much emphasis can be given to the role of experts in the 1930s. Crop restrictions were first proposed by Henry A. Wallace as early as 1921. Peek and others already constituted a considerable body of expert opinion in the 1920s. Finally, the Farm Board's switch to limited agricultural subsidies following the stock market crash illustrates the force of events. See also Kirkendall, Richard S., Social Scientists and Farm Politics in the Age of Roosevelt (Columbia: University of Missouri Press, 1966).Google Scholar

43 Schickele, Rainer, Agricultural Policy (New York: McGraw-Hill, 1954), 214.Google Scholar

44 Tasca, Henry J., The Reciprocal Trade Policy of the United States: A Study in Trade Philosophy (Philadelphia: University of Pennsylvania Press, 1938)CrossRefGoogle Scholar; and Kottma, Richard N., Reciprocity and the North Atlantic Triangle, 1932–1938 (Ithaca: Cornell University Press, 1968).Google Scholar

45 Rau, Allan, Agricultural Policy and Trade Liberalization in the United States (Paris, 1957), 64.Google Scholar

46 David N. Balaam, “The Political Economy of U.S. Agricultural Trade Policy, 19171985” (paper presented to the Annual Meeting of the American Political Science Association, Washington, D.C., August 1986).

47 Ibid., see also Peterson Agricultural Experts.

48 See Congressional Quarterly, Farm Policy: The Politics of Soil, Surpluses, and Subsidies (Washington, D.C., 1984), 129.Google Scholar