The American experience with farm policies from the depths of the
Great Depression, when farm families made up a quarter of the population,
to the end of the century, when many fewer farmers represent less
than 2 percent of all families, is a fascinating social and economic
history. But while the Agricultural Adjustment Act of 1933 (AAA)
was the first legislation enacted specifically to raise farm incomes,
federal policies have affected agriculture in one way or another
since before the birth of the nation.
Land policies came first
The earliest agricultural policies in North America dealt with land
settlement. Before independence, the British crown had tried to
stop European settlement west of the Alleghenies, in part to meet
obligations made to Native American peoples in various treaties,
but also to maintain the asset values of large landowners such as
the Penns, Calverts and De la Wares in coastal colonies. That tension,
between owners of existing farms, whose value would appreciate more
rapidly if the supply of land were restricted, and a potential farm
population swelled by birth and immigration, was to persist until
the closing of the frontier in the last decade of the 19th century.
A vision came before policy
The ideal structure of American agriculture was an important issue
to some of the framers of the republic. Thomas Jefferson, himself
a Virginia plantation owner, argued forcefully that agriculture
based on independent small farmers was socially and morally superior
to other models, especially the quasi-feudal systems of large landowners
and tenants that still prevailed in much of Europe. While Jefferson's
ideal of the yeoman farmer was not specified in early legislation,
this theme has been pervasive throughout the political life of American
agriculture, and contemporary calls to save the family farm hark
back to Jefferson.
Moreover, an explicit bias in favor of the independent small landholder
was part of the political agenda of succeeding statesmen such as
Andrew Jackson and Henry Clay. For the 150 years of the American
republic, there was no "farm bill," no explicit federal agricultural
policy. But there were policies, particularly those of settlement
and transportation infrastructure, that strongly affected farmer
households and the structure of agriculture.
Ag policy was often land policy
The legislation of greatest relevance to agriculture was that dealing
with disposition of government lands in the West. Such legislation
included the Northwest Ordinances of 1785 and 1787, intended to
facilitate the settlement of the "Old Northwest" of Ohio, Indiana
and Illinois, through the Homestead Act of 1862, to the Reclamation
Act of 1902, which collectively transferred to private ownership
most of the territory between the Appalachians and the Great Basin.
Cheaper transportation favored frontier farmers
Government support for construction of transportation infrastructure,
such as canals, railroads and roads, also had a profound influence
on agriculture. Even before the Prussian economist and farm manager
J.H. von Thunen formulated his theories relating location, transportation
costs and land prices, American farmers knew that proximity to a
road, canal or railroad would increase the farm-gate price of their
produce and the value of their land. Moving agricultural goods to
market more cheaply was a primary objective for many of the canals
built, chiefly with state government financing, in the first half
of the 1800s.
Later, land grants to railroads as an incentive to build trackage
also put millions of acres into the market. Liberal land transfer
policies favored rapid settlement and acted as a social safety valve
by allowing lower-income people to become landowners, but, as in
colonial days, they also tended to keep commodity and land prices
lower than they might have been with a more restrictive approach.
Tariffs and taxes also mattered
But beyond land disposal and transportation, the government policies
that affected farmers most were the same ones that affected all
sectors of society: general fiscal and trade policies. The two were
combined in "the tariff," as it was known in political discourse
well into this century. Tariffs, or taxes on imported goods, together
with income from the sale of land, provided the bulk of federal
revenues for over a century. In general, farmers on the frontier
and Southern plantation owners favored low tariffs on importsfarmers
because such tariffs increased the costs of manufactured goods,
Southern plantation owners for the same reason, with the added argument
that low tariffs on imports from Great Britain, the United States'
largest trade partner, would be reciprocated in low British tariffs
on imports of U.S. cotton, and hence higher cotton prices for Southern
While import duties were the largest component of federal taxes,
specific excise taxes could rouse agrarian tempers. One early internal
challenge to the new republic, the Whiskey Rebellion of 1792, was
motivated by farmers angry with a new tax on distilled spirits,
an important value-added agricultural product in the days before
railroads or refrigeration. The tax was imposed to help repay war
bonds, largely owned by established commercial families in coastal
cities, during a time of generally falling commodity prices as the
Treasury shrank the effective money supply by such debt payment.
Postwar economic conditions also had led to Shays' Rebellion in
1786, a protest against land taxes. This phenomenon, rural discontent
fueled by fiscal and monetary policies unfavorable to the rural
sector, was to be repeated in the next two centuries.
Morrill links land and education
Following initiatives by state governments in Pennsylvania and Wisconsin,
in 1862 Congress passed an act authored by Rep. Justin Morrill of
Vermont, setting aside public lands to be used by the states to
fund colleges to teach "such branches of learning as are related
to agriculture and the mechanic arts." While it took many years
to come to fruition, the Morrill Act laid the basis for a teaching,
research and extension system that would foster rapid technological
change in the following century.
This funding of public education and research at the college level
complemented provisions in the Homestead Act that required a portion
of land in each township to be set aside as a site and funding source
for public grade schools.
The constraints of hard money
A return to the gold standard after the Civil War resulted in a
similar period of postwar deflation that gave rise to the National
Grange and other farm organizations. This period of farm discontent
also led to regulation of monopolistic activity at the state level
through Railroad and Warehouse commissions and by the Interstate
Commerce Commission at the federal level. The Interstate Commerce
Act gave the federal government power to regulate interstate freight
rates and, some would argue, set up a model of economic intervention
that would reach a high point in the AAA and other New Deal agencies.
Golden age of farming turns to lead
The short period from the dawn of the 20th century to, or through,
World War I is often described as the golden age of U.S. agriculture.
Technology had reduced the drudgery of farming, and the closing
of the frontier had slowed the increase in output to less than the
growth of the consuming public, so farm prices rose. Indeed, farm
prices were so favorable relative to those of other goods that even
today, when farm leaders call for measures to restore farm prices
to "parity" with nonfarm prices, the reference period they seek
to match is that from 1910 to 1914. Farm incomes relative to those
of nonfarm households were also higher than in any preceding and
most succeeding periods.
World War I, like most major wars, cut agricultural output in
the combatant nations and increased world farm commodity prices.
The United States and Argentina, as major exporters, were best positioned
to benefit, and farm prices and incomes remained high through 1918.
Indeed, when the United States entered the war in 1917, loose wartime
fiscal and monetary policies helped raise nominal farm prices even
But the armistice, postwar recessions in Germany and France, and
a return to "sound finance" in the United States resulted in drastic
drops in farm prices and incomes. By 1921 farmers, like their urban
counterparts, were in a sharp recession. Unlike the urban sectors,
farming did not recover as the decade went on, and for farmers,
the Depression effectively began in 1921.
McNary-Haugen, the first farm bill
As the '20s began to roar everywhere but in the countryside, Sen.
Charles McNary of Oregon and Rep. Gilbert Haugen of Iowa responded
to the plight of their farm constituents. With the assistance of
Coolidge's Secretary of Agriculture Henry C. Wallace, uncle of Henry
A. Wallace, agriculture secretary and vice president under Franklin
Roosevelt, they introduced a bill to raise farm incomes by dumping
surplus commodities abroad at lower prices than would prevail within
the United States. Farm producers would receive payments equal to
their proportional share of domestic and foreign sales.
The McNary-Haugen Bill, in various incarnations, caused intense congressional
debate for over four years, and was passed twice. However President Coolidge
also vetoed it twice, even though his own secretary and Department of
Agriculture had been instrumental in its drafting. His successor, Herbert
Hoover, was similarly opposed to such government intervention. Hoover
did approve a Farm Marketing Board that would, with the help of federal
subsidies, buy farm products during times of "surplus" for later disposal
during times of "shortage." This board, established with limited finances,
collapsed under the effort of battling a 50 percent decline in farm commodity
prices in the last half of 1929. Following its demise, little was done
in the way of federal agricultural legislation until Franklin Roosevelt
was inaugurated in 1933. But while McNary-Haugen never was implemented,
elements of it turned up again and again in succeeding decades. For example,
the Export Enhancement Program, which survives in a curtailed form in
the 1995 farm billin spite of the rhetoric of getting the government
out of agricultureis virtually a direct copy of McNary-Haugen's
surplus dumping provisions.