Farm Policy

views updated

FARM POLICY

Farmers were among those hardest hit by the Great Depression. Their problems, however, had been around for nearly a decade. During World War I, European agriculture had been largely destroyed, and the U.S. government had been purchasing farm products. The result was inflated prices for many crops. From 1916 to 1919, for example, net farm income rose from $4 billion to $10 billion. In 1920, however, a combination of agricultural recovery in Europe and an end to government purchases of wheat created a situation in which the market was flooded with surplus crops. A bushel of wheat quickly fell from $2.50 to less than a dollar. As prices tumbled, a decline exacerbated by the stock market crash of 1929, American farmers went from producing 16 percent to 9 percent of the national income.

When Franklin D. Roosevelt became president in 1933, he promised in his inaugural speech on March 4, 1933, to restore the health of agriculture. If the purchasing power of farmers was restored, he believed, farmers would in turn help boost the demand for manufactured goods. This could be accomplished, Roosevelt and many others believed, by decreasing production. Throughout the 1920s, agriculture had been characterized by overproduction as more crops were produced than the market could handle, thereby effectively driving down the prices. Farmers, then, were seen by Roosevelt as the key to bringing the nation out of the Depression.

Under the direction of Secretary of Agriculture Henry A. Wallace, the Roosevelt administration drew up the Agricultural Adjustment Act. The theory was that if production could be limited, then prices would rise, demand for farm commodities would more nearly match supply, and agriculture would recover. With these aims, the Act was pushed through Congress in May 1933. The Agricultural Adjustment Act gave subsidies to farmers based on the acreage of farmland that landowners either allowed to lie fallow or used for the production of non-surplus crops. For every bushel of corn, for example, that corn farmers did not raise, the government would pay them thirty cents. Over the next two years, while many Americans were starving, over thirty million acres of cotton, corn, and wheat fields were taken out of production, with farmers receiving over $1.1 billion in government subsidies.

The goals of the Agricultural Adjustment Act were largely attained; from 1932 to 1936, the price of a bushel of wheat almost tripled. And hogs, which had been selling at $3.34 per hundred pounds, rose to $9.37. In terms of overall income, farmers witnessed a rise of $1.8 billion to $5 billion. If landowners benefited from the Agricultural Adjustment Act, those who worked their lands, such as tenant farmers and sharecroppers, did not. Although landowners were supposed to share the government payments with their tenants, they often failed to do so. Landowners, particularly in the South, pocketed the cash while evicting their tenants or sharecroppers, or cutting their acreage and simply not allowing them to grow cash crops.

In addition to the Agricultural Adjustment Act, the Roosevelt administration launched the Tennessee Valley Authority, which was designed, in part, to aid the farmers of the rural South. In short, this public corporation held as central goals the generation of electricity along the Tennessee River and the making and distributing of nitrogen-based fertilizer. Thus, while attempts were made to limit the production of cash crops through the Agricultural Adjustment Act, other attempts were simultaneously made to increase the productivity of the farmers of the rural South.

While the droughts, floods, and dust storms (such as the 1935 to 1940 dust storms that caused the Dust Bowl in the states of Oklahoma, Texas, Kansas, and Colorado) helped to reduce harvests and push up prices, new technologies counteracted the effects of such natural disasters, increasing productivity and driving small farmers from the land. In the 1930s, hybrid corn was developed and became increasingly popular among farmers in the Midwest. This new type of corn proved more resistant to disease and insects. In addition, the stalks grew straight and strong, the crop ripened all at once, and the ears were all at the same height, which meant that by using another new technology—the gasoline tractor—productivity would be increased. Even with other crops, such as cotton and new mechanical cotton-pickers, technology was used to increase production while the Roosevelt administration was simultaneously attempting to limit production.

In Butler v. U.S. (1936) the U.S. Supreme Court ruled the Agricultural Adjustment Act to be unconstitutional. To replace it, Congress passed the Soil Conservation and Domestic Allotment Act in 1936. This law aimed at eliminating soil-depleting crops and subsidizing farmers with general revenues rather than a special tax. In 1938, however, production quotas returned with a second Agricultural Adjustment Act. This farm bill, much like the original 1933 Act, gave the federal government the authority both to pay farmers not to plant crops and to set market prices for agricultural goods. Until World War II pulled the nation out of the Depression, subsidization served to reduce price inflation for agricultural goods and to increase net farm income.