The recent history of western agriculture can be summarised with its most recurrent topic "the farm problem". Ever since the market economy begun to swallow up farms in Western Europe and North America in the second half the 1800s, the famous "cost-price squeeze" have forced farmers to expand production, to capitalize, to reduce labour input by mechanizing and by using biotechnology; and always, in despair, farmers have turned to their governments for economic aid to remain in the land. The world has witnessed the disappearance of the old peasantry as this could not survive its incorporation to the world market.
US agriculture represents the peak of commercial agriculture; it is the image of the future of agriculture in other industrial countries. At present the farming population in the US represents less than 2 percent of total population, and farmers have become really cost efficient. But US farmers still depend on government subsidies to survive.
A book by R. Douglas Hurt ("Problems of Plenty", Ivan R. Dee: Chicago, 2002) looks at the farm problem in the context of US agriculture in its historical perspective. It focuses on the relationship between farmers and the US governments, and the role of subsidies throughout the 20th century. Written in plain English, it is very easy to get through the chapters, and short enough (173 pages) to read in three or four sittings.
The book starts at the beginning of the 20th century, when the farm population of the US represented 42 percent (30 million) of the total population and there were 6.7 million farms on the land. Between then and the close of the century, the farm population was reduced to a mere 1.6 percent (4.4 million), and the number of farms went down to 2.2 million. At the same time, the average farm size went up from 147 to 434 acres. Production also increased due to mechanization and the use of biotechnology, but the book doesn't offer data on output. The two first decades of the 20th century represented the golden age of commercial farming in the US: urban demand for food increased faster than the production of food. Then came World War One - demand and prices rose even higher than before. Average farm income doubled per farm between 1910 and 1920.
Nonetheless, farmers complained about monopoly practices from railway companies, and their lack of control over prices. Basically, their fragmentation and individualism didn't allow them to control prices or to estimate demand like manufactures did; they sold wholesale and bought retail - other than that, the market worked fine for them. Farmers only demanded the government to restore "fair" competition and to help farmers to constitute cooperatives of marketing in order to achieve some control over prices.
But the return of European farmers to their farms at the end of the war, and the demobilization of the US army left American farmers with an amount of produce that the markets could not absorb. Competition in the international market also intensified. In 1921, prices dropped and farmers, unable to regulate production by themselves, turned their heads to the government for help. They had answered to the call of the government to increase their production during wartime and now they wanted the government to assist them in times of need.
Net farm income fell from $9bn in 1919 to $3.3bn in 1921. The drop in prices was a consequence of overproduction, but farmers responded mainly by increasing acreage to compensate for low prices. The introduction of fertilizers, hybrid seeds and new technology also increased production due to higher productivity. The cost of inputs fell as well, but at a slower rate than prices, and higher productivity rates didn't compensate. The cost-price squeeze appeared in US agriculture. And as always happens in time of crisis, the small and less cost efficient farmer took the hardest blows.
Two trends within the government of the US appeared at that time to solve the crisis. On the one hand, the most conservative congressmen argued that the market would eventually regulate agricultural prices by itself, even if that meant that many would have to leave farming. Another trend argued that the farmers could not control prices as a group because of their fragmentation and high numbers. So they were unable to estimate demand and the government would have to establish mechanisms to control prices. They also considered farming a strategic economic sector, vital for the nation.
The exception was the large Californian fruit and vegetable growers, grouped around the California Fruit Growers Exchange. They cut out the middleman and had some control over prices. But the rest of marketing groups throughout America were too small to have any power of negotiation. Farmers were not a class and their interests differed widely: some were very large while others were small; some were capital intensive, while others lacked the means to mechanise operations. The poorest were the tenants and sharecroppers of the old fields of cotton in the South. More successful were farmers in lobbying the government through interest groups such as the American Farm Bureau, although this organisation mainly represented the interests of the large farmers. In the 1920s the farm population represented around 30 percent of the total of the US. That gave farming organisations some leverage in order to get grant aid and subsidies.
The financial crash in 1929 worsened the "farm problem". The 1930s started with further falls in prices and farmers, particularly the smallest and least capital intensive, demanded that the government guarantee costs of production prices plus a minimum income. Until then the government had only supported farmers marketing operations, but that orientation changed completely under the presidency of F.D. Roosevelt. The New Deal in agriculture, Agricultural Adjustment Act of 1933, introduced a crop reduction program to control prices and price support subsidies. Farmers who entered the program got a compensation for the reduction in production. In the end, the state's subsidies benefited mainly the large farmers, who got much higher compensations since these were calculated according to volume. In the south, landowners reduced acreage to get economic aid by sacking tenants and sharecroppers. In the end, the program didn't restore the balance between supply and demand, although it succeeded in keeping farmers on the land in a time of high unemployment rates. By 1941 a third of gross farm income came from government payments. Once subsidies started, there was no turning back. But farmers were going to improve their incomes thanks to World War II and a dramatic increase in food demand. Keeping farmers on the land during the 1930s actually paid off in the end. Farmers were now asked to produce more.
The end of the war scared farmers and, in order to keep government subsidies, they voted massively for the democrat Truman in the 1948 presidential election. Then the war in Korea brought another period of prosperity to US farmers. Restrictions to production were reintroduced with the agricultural act of 1956. 28 million acres were withdrawn from production until the program was abandoned in 1959. Farmers were only removing from production the least productive land. On the other hand, increases in productivity cancelled out the effects of the program. Prices kept dropping, and, in spite of heavy price support subsidies, many farmers were put off the land or had to resort to part-time off-farm employment.
In the early 1960s, the Kennedy administration tried to control production to increase prices, and failed for the same reasons. Yet, farm incomes went up, most probably because the poorest left farming, and also because of an increase in agricultural exports, mainly to communist countries. The 1970s brought again generalized falls in prices and increases in costs. The "farm problem" spiralled out of control. By 1985 farmers represented only 2.2 percent of the population:
As productivity increased, only the most efficient farmers were able to marshal the resources needed to maintain their operation in an economy in which they had no control over the prices they received. Government programs helped large-scale farmers to stay on the land. Yet these programs worked to the advantage of large-scale farmers, enabling them to purchase more land and equipment while forcing small-scale, noncompetitive, or unprofitable farmers from the land. (pp. 148-9)
In spite of the reduction in the number of farmers, and the efficiency of the remaining, in 2000 subsidies provided 40 percent of farm incomes. The top 16 percent of farmers got 62 per cent of all subsidies, and 65 percent of the farm incomes came from off-farm employment. There were still too many farms on the land.
"Problems of Plenty" shows what happens when commercial farmers become very efficient. In ancient or medieval societies, for example, overproduction was a blessing and was celebrated as such. In the market economy, however, what matters is to realize the value of what has been produced. Goods that are not sold are worth nothing. But why has overproduction affected particularly farmers and why has no solution been found to date? Why are farmers unable to survive without subsidies? And why do costs increase faster than prices? The book doesn't analyse those questions. It is too brief, broad, and descriptive. A theoretical chapter would have made it more complete, but I guess it was meant for a very wide audience. We are just told that farmers cannot control prices and cannot estimate demand because they are too many, too small, and too fragmented. American agriculture is not placed either in the context of the world market.
We can only guess what would happen to farmers in the US if they didn't get subsidies, if they were left to the invisible hand of the market. Even large corporations in agriculture say that price support subsidies are survival money for them. On the other hand, large fruit and vegetable growers in California can successfully control price and estimate demand, but they rely completely on immigrant labour on very cheap wages.
Nevertheless as an overview of farming in the 20th century in the US, "Problems of Plenty" is worth reading. It can also help elucidate the "farm problem" in Ireland in general, and in the mushroom industry in particular.
