Effects of New Deal Farm Programs on the Agricultural Agenda a Half Century Later and Prospect for the Future

Abstract

I feel qualified to comment on New Deal farm programs, having been a farmer when they were enacted, a student while they were growing up, and having helped administer them as they matured. I am going to concentrate on the Agricultural Adjustment Administration and its successor agencies. The AAA was the agency charged with supporting the price and regulating the production of major farm products. There are other New Deal farm programs of importance, of course. But lifting up the AAA is appropriate; it was, after all, the major New Deal farm initiative and is the agency whose fiftieth birthday we are observing. The Great Depression laid the basis for the AAA. Only the older people in this audience can recall it. A few figures will help calibrate the disaster. From 1929 to 1932, the index of prices received by U.S. farmers fell 56%. Net income of agriculture fell 70%, from $6.3 billion to $1.9 billion. I was farming then, with my father and brother, in Northwestern Indianai, keeping farm records in collaboration with Purdue University. Our labor income in 1932 was a negative $1,203. Farmers, needing help, undertook a number of desperate acts. In a dramatic protest against foreclosures they threatened to hang a federal judge. They overturned milk trucks, picketed packing plants, and boycotted farm sales. The mood was ominous. There was anger, frustration, and insistence on action. The Great Depression was worldwide. In Italy and Germany representative government was replaced by dictatorships. The American political and economic systems were threatened. What was the cause of the trouble? There were two schools of thought. One, led by Dr. George F. Warren of Cornell University, assessed the problem as general, resulting from the collapse of money and credit. The remedy, said this group, lay in a changed monetary policy (Warren and Pearson, pp. 178-82). The other school, led by Dr. John D. Black of Harvard, diagnosed the farm problem as arising within agriculture itself, the result of surplus production. The remedy, according to this group, consisted of reducing supplies so as to increase farm prices (Black). As always, disciples interpreted and misinterpreted their prophets. Proposals were offered in the names of Warren and Black that were far from the views of these men. In any case the two groups polarized, one wanting monetary reform and the other pushing for production control. The contention that the problem was overproduction of farm products had a shaky foundation. Total agricultural production during the five first and worst years of the Great Depression, 1930-34, was actually 2% below the production of the five preceding years (USDA 1942, p. 659). Belief that the problem was a phenomenon of money and credit had much to support it. Credit collapsed; the stock of money fell by more than one-third (Friedman). Prices fell for virtually all commodities, whether abundant or in short supply. Commodity prices fell in every country for which statistical information was available. Neither farmers nor politicians understood the complexities of central banking. On the other hand, the diagnosis that agriculture was suffering from overproduction was credible both to farmers and politicians. They knew that excessive production meant low prices and reasoned that with prices low there must be excess production. It was felt that with the low prices of internationally traded farm products, American agriculture could not compete in world markets. The proposal was that we reduce production, turn inward, and create an American farm price structure basically higher than in the rest Don Paarlberg is a professor emeritus, Department of Agricultural Economics, Purdue University.