In the previous post in this series I presented two models of a farm economy that were widely deployed in the British colonies of North America. In this post we will go over how government action affected the use of both models from the first decades of our country’s independence until the New Deal era just prior to World War II. This review will provide us with some understanding of the problems faced by earlier generations of farmers. That background will make it easier to understand how the American agricultural economy has become a plaything of the wealthy in more recent times.
After our country gained independence, restrictions on expansion westward imposed by the British government were removed. Again, I won’t dwell on the shameful history of our treatment of native Americans. Our focus here is on how government policies shaped which model of rural economy dominated as the country expanded. For more details on the changes in farm policy I will summarizing here, check out this document.
At first, federal policy favored selling newly-seized federal lands in the west to private parties at high prices. Southern politicians favored one goal of this policy, namely the spread of the plantation model. And, in fact, in the south the plantation model continued to expand westward. Wealthy planters could afford to buy large tracts of land. It was cheaper for them to move their plantations westward than to try replenishing the soils they had exhausted by repeatedly planting the same one or two crops they had been growing on their existing plots. The invention of the cotton gin opened a new market for cotton, which happened to grow wonderfully across large sections of the south. This also encouraged the spread of the plantation model, since the intense labor needed to harvest cotton could be obtained cheaply by using slaves.
Over the course of the early 19th century federal policy was repeatedly modified to promote the spread of the yeoman farmer model. Finally, the Homestead Act of 1864, passed during the Civil War when the southern states were not actively involved in US federal policy, settled the issue decisively in favor of the yeoman farm model for newly-settled lands in the mid-western and western US. As a result, by the end of the 19th century the vast majority of agriculture in America was carried out by small farmers. It should be pointed out that this act, and a couple of follow-up acts in the decade of the 1900s led to many new farms in the great plains, many new farmers, and the loss of huge tracts of native prairie land to agriculture. This led to some unforeseen consequences in later decades.
The American economy as a whole was transformed by the Civil War. Manufacturing, finance, and transportation industries exploded in size and economic power. As one might expect from our discussion of the unique vulnerabilities of rural communities, small farms were targeted for exploitation by some of these large businesses. For example, the railroad and riverboat barons raised shipping fees to the point that farmers found it difficult to afford shipping their products to market via rail or boat. Farm communities pressured their federal representatives to give them relief from these monopolies. This is one reason the Sherman Anti-Trust Act of 1890 was passed by Congress.
It would be a mistake to think that these major changer eliminated the plantation model altogether. Instead, via a series of maneuvers powerful landowners in the former Confederate states were able to re-establish the plantation model. First, they were able to break down the Reconstruction Era promise made to former slave owners that they would be able to establish small farms of their own. The famous “40 acres and a mule” policy was weakened and ignored to the extent that the majority of former slaves and their descendants who worked in agriculture in the southern states were either tenant farmers or farm laborers on land rented from the great plantation owners or their descendants.
Family farms did relatively well in the first two decades of the 20th century. As mentioned above, both the number of family farms and the average income of farm owners increased during these two decades. At first this was a result of several factors. Both federal and state government designed policies to protect farmers from exploitation by monopolists, ease their ability to obtain loans, and obtain information on improved farming and marketing techniques. The rise of farm cooperatives and organizations helped farmers pool their power and obtain better prices for their products. Organizations such as the Grange had been lobbying for the interests of family farmers to governments at all levels since its founding after the Civil War and the collective result of these efforts was also bearing fruit (sorry for the pun!) at this time.
When World War I broke out in 1914 European farm output dropped. Many American farmers, who were already doing relatively well, responded by quickly increasing production. During the war years American farmers prospered. The war ended in 1918, and by 1920 European agriculture was well on the way to recovery from the devastation of the war. As their production went up, the need for imports from America declined. American farmers who had rushed to increase production could not find another market for much of the crop they had produced. As a result, the price of agricultural products dropped. Farmers who had taken out loans to pay for lands they had bought to grow more crops or to buy seed and equipment were no longer able to make enough money to keep up with loan payments.
The federal government made some attempts to address farmers’ concerns in the 1920s but they didn’t lead to significant improvements for most farmers. Then twin disasters struck between 1929 and 1935. The Great Depression caused prices for agricultural products to drop precipitously, leaving many more farmers unable to make loan payments. Many farmers responded at first by trying to increase yields, but that just pushed prices down even further. Starting in 1931 a multi-year drought struck the mid-west. Crops failed. Many of the newer farm families were relatively inexperienced with drought conditions and had not developed strategies to deal with them. As a result, millions of acres of land were left bare. High winds carried off topsoil in dust storms. With their farms ruined, many farm families had little choice but to abandon their homes and move. All told, about 2.5 million people migrated out of the great plains states due to economic hardship during the 1930s.
The New Deal program initiated by the FDR administration included several measures addressing agricultural issues specifically. These measures altered the economics of farming fundamentally and laid the legal parameters for the recovery of American agriculture that took place starting in the 1940s.
The primary piece of legislation included in FDR’s New Deal for agriculture was the Agricultural Adjustment Act of 1933. This law, with some follow-up legislation in 1934 and 1935, set up a subsidy system for production of major agricultural commodities: wheat, corn (maize), hogs, cotton, tobacco, rice, milk, rye, flax, barley, grain sorghum, cattle, peanuts, sugar beets, sugar cane, and potatoes. Farmers were encouraged to work with the newly-formed federal agency, the Agricultural Adjustment Administration, to arrive at a level of production that would enable the farmer to receive a price for their produce as close as possible to the target price fixed by the law. The law specified that the target price would be the price for the produce in the years 1910-1914, when prices for farm products were high enough for most farmers to do well financially. If the farmer was forced to sell her produce below the target price the federal government paid the farmer a subsidy to bring her total receipts up to what they would have been if she had been paid the target price.
This law stabilized agricultural markets and saved many farmers from going bankrupt and many farms from foreclosure. The law was drafted largely based on the yeoman farm model, where the owner of the farm was also the person working the land. The federal agency worked directly with landowners, not farm laborers or tenant farmers. In a sharecropping situation, the federal government reimbursed the landowner if the price of the produce sold by tenant farmers using that land did not meet the target price. The law included provisions to ensure that for any subsidies awarded to landowners, appropriate percentages would be shared with tenant farmers or laborers who had worked the land. Southern lawmakers were able to weaken the subsidy sharing provisions and some agency employees overseeing the program in southern states purposely failed to enforce the provisions. As a result, tenant farmers in the south were largely driven out of business in the following decades.
The Supreme Court overthrew the Agricultural Adjustment Act in 1936 but the FDR administration was able to pass modified legislation tin 1938 hat passed muster with the Supreme Court and continued the subsidies. Congress also included in this legislation provisions to help mid-west farmers recover from the dust bowl devastation and change farming practices to protect and preserve topsoil.
The sum total of the changes brought about by the New Deal brought many American farmers teetering on the edge of bankruptcy and desperation into relative prosperity. In other cases, e.g. the “Okies” who migrated from the midwest to California to escape the Dust Bowl or the southern tenant farmers we mentioned above, the New Deal programs were not enough to save them from impoverishment. As a whole, however, the use of the plantation model was greatly reduced. Most farms remained of moderate size and operated on the yeoman model.
After World War II this situation changed drastically. What happened to the farm economy then and what it did to rural communities will be the topic of our next post.