Government Farm Policy (Issue)

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Farming has little concrete meaning for many Americans. Society is so urbanized that the ordinary citizen's notions of farm life are highly abstract and usually inaccurate. The farm does have a secure positionperhaps even a mythic statusin the national culture, however. This status has shaped American political rhetoric from President Thomas Jefferson (18011809) to the present time. Discussion of the "plight of the farmer" and the "disappearance of the family farm" in modern America are usually coded language for the crisis that besets middle-class urban or suburban families who see their personal freedom diminishing in relation to economic developments over which they have no controljust like the farmer.

Such thinking about the plight of the farmer has a New Deal ring to it. Although the Democratic President Bill Clinton once declared that "the era of big government is over," many Americans who think about the problems of rural America seem to assume the necessity of an active role for the federal government. This belief that it is the responsibility of the government to take care of the farmer dates back to the early 1920s, when rural parts of the United States went into a depression almost 10 years before the rest of the country followed suit.

During World War I (19141918) the federal government encouraged farmers to increase production. When farmers maintained wartime levels of production in the postwar period, the result was a sharp drop in farm prices. Farm income plunged from almost $1,400 in 1917 to a little over $500 in 1921. In order to pay their mortgages and costs of production, farmers demanded a government subsidy, which they called "parity." The Agricultural Credits Act, passed in 1923, was one of several attempts to bolster the farm commodity price levels. However, it failed to deploy enough resources to solve the problem of low farm prices.

In 1929 President Herbert Hoover (19291933) signed the Agricultural Marketing Act, which established the Federal Farm Board with a fund of $500 million. The Farm Board helped to found farming cooperatives and set up stabilization boards; such boards would regulate the prices of grain and cotton by making purchases on the open market. Such purchases, however, only encouraged farmers to put more land in cultivation in expectation of greater profits. Consequently, the Farm Board failed and had to sell its holdings at a loss of $200 million.

The Agricultural Adjustment Act (AAA) of 1933, one of the first pieces of legislation passed under President Franklin Delano Roosevelt (19331945) in his New Deal program, attempted to control farm prices by reducing and controlling the supply of basic crops. The AAA empowered the Secretary of Agriculture to fix marketing quotas for major farm products, to take surplus production off the market, and to decrease production of staple crops by offering producers payments in return for voluntarily reducing the acreage devoted to raising such crops. The Commodity Credit Corporation (CCC), also created in 1933, began making loans to farmers on agricultural products. The CCC granted loans only to farmers who agreed to sign production-control agreements. Farm prices steadily improved, and between 1932 and 1937 the prices for major farm products increased by almost 85 percent. But in a major setback, the U.S. Supreme Court declared certain production control features of the AAA unconstitutional.

Large crops of wheat and cotton led to passage of the Agricultural Act of 1937. In its amended form, this act provided the framework for the major farm programs that are still in effect today. The act made price-support loans by the CCC mandatory on the designated basic commodities of corn, wheat, and cotton, and it authorized optional support for other commodities. Under this act and subsequent legislation, the CCC supported more than one hundred different commodities, including fruit, vegetables, and various types of seed.

From 1941 to 1948, during and just after World War II (19391945), surpluses were rapidly utilized, and price supports became an incentive to stimulate production of agricultural commodities. In 1948 price-support levels were lowered for most of those commodities. By 1949 the agriculture of war-devastated Europe and Asia had recovered to a significant extent, and the demand for American farm products declined considerably. At the same time, however, crop production in the United States had greatly increased; as a result, farm commodity prices dropped and surpluses began to build up again. Rigid support levels were once again enacted, but when the Korean War (19501953) strengthened farm prices, most CCC stocks were sold. Mounting surpluses and increased costs of government programs led to the enactment of a flexible price-support program (1954) and of the Soil Bank program (1956). These programs offered direct payments to farmers only if they agreed to reduce their acreage of major supported crops and to leave fallow the land removed from production. Ultimately, these control programs did not achieve the desired effect, since improved technology made it possible for farmers to greatly increase their yields per acre.

In the early 1960s price supports on major commodities were pegged at or near market-clearing prices, and producers' incomes were protected by direct payments on fixed quantities of products. Direct payments to farmers have greatly increased since the 1960s, with the feed-grain, cotton, and wheat programs accounting for most of this increase. Yet once introduced, federal subsidies to maintain prices have proved extremely difficult to end. In 1989 the U.S. Department of Agriculture paid farmers more than $10.8 billion in various subsidies. In France, farmers have vigorously protested an imminent decrease in the subsidies ($34 billion in 198990) that have made them the world's second largest food exporter after the United States. Agricultural subsidies in the United States, Japan, and Europe were issues of contentious debate during Uruguay's round of international trade negotiations under the General Agreement on Tariffs and Trade (GATT) in 1990.

Some economists have argued that U.S. export expansion policies have undermined foreign production capacity, altered consumer preference, and consequently created dependence on imports of wheat and other grains. They argue that domestic U.S. farm policies have aggravated supply and price volatility for wheat and other cereal crops and that developing nations are pressured during trade negotiations to exchange domestic food security policies for access to the world trade market and debt-servicing arrangements. Unable to compete with U.S. production resources and U.S. Treasurysubsidized cereal prices, farmers in many poorer nations find that the prices they receive for their crops don't cover their costs. Economists point out that as early as 1965, food aid to India had driven down the price of domestic wheat and curtailed native production. Similar problems have occurred during the past three decades in nations throughout Africa, Latin America, and Asia.

A growing number of economists claim that small-scale farming must be made economically viable again so that established small farmers can survive and new ones can get started. They argue that this can be accomplished either by eliminating the favors the federal government bestows on large farms and corporate farming; or else by enacting labor laws that guarantee a minimum wage to farmworkers that is equal to that of other workers; or finally by writing legislation that makes the willful and acknowledged employment of illegal aliens punishable by imprisonment.

Still others claim that subsidy programs should be revised. They argue that when farm subsidies began during the New Deal, they were intended to help the impoverished small farmer. But because they were pegged to total marketing and total acreage rather than to personal income, they ended up lining the pockets of the wealthy. These same economists argue that if farm subsidies are continuedas the economists think they should be in order to stabilize farm incomethey ought to be strongly weighted in favor of small farmers. They contend that no farmer should receive subsidies for crops grown (or not grown) on land in excess of a certain acreage, and that farm subsidies could be completely detached from crops and related to income instead. Farmers could sell on the open market, with federal payments making up the difference, if any, between earnings and a minimum livable income. Aiming to protect the small farmer from the conglomerates, they also support protective legislation that would work like a forceful antitrust policy for agriculture.

There is yet another school of thinking: some claim that the current federal agricultural policy should include a redistribution of land. These critics explain that the guiding principles behind redistribution are that land should belong to those who work and live on it and also that holdings should be of reasonable, not feudal, proportions.

Many economists believe that federal farm programs have been rationalized in the past based on public interest or "market failure" grounds, and that government intervention has been justified because agricultural markets do not conform to an ideal level of competition. But conservatives claim that government failurerather than market failurebetter explains the persistence of wasteful and inconsistent farm programs. Whatever the position, the issue of agribusiness will only get more controversial as e-commerce, the global marketplace, and increases in the world population further complicate the debate.

See also: Agriculture Industry, Farm Credit Administration, General Agreement on Tariffs and Trade, Government Land Policy


Benedict, Murray. Farm Policies of the United States, 17901950. New York: Twentieth Century Fund, 1953.

Davis, Joseph S. On Agricultural Policy, 19261938. Stanford: Food Research Institute, 1939.

Hamilton, David. From New Day to New Deal. Chapel Hill: University of North Carolina Press, 1991.

Kirkendall, Richard. Social Scientists and Farm Politics in the Age of Roosevelt. Ames, Iowa: Iowa State University Press, 1982.

Nourse, Edwin G. Marketing Agreements Under the AAA. Washington, DC: Brookings Institution, 1935.

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Government Farm Policy (Issue)

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Government Farm Policy (Issue)