In October 1942 Congress passed a Stabilization Act which brought about reductions in the levels at which price ceilings could be placed on farm products; specifically, no ceiling could be applied lower than the parity price for the commodity or the highest price paid between Jan. 1 and Sept. 15, 1942.
An escape clause, however, permitted the president to set a price below the indicated level if necessary to correct "gross inequities." The act also set up tighter controls on wages and the implementation of post-World War II price-support arrangements.
Prior to the passage of this act, in 1941, Rep. Henry B. Steagall of Alabama had attached a rider to the Commodity Credit Corp. authorization bill which stated that any agricultural commodities for which the secretary of agriculture had asked for increased production as a contribution to the war effort had to be provided with support prices at 85% of parity. Subsequently, in the Stabilization Act of October 1942 the Steagall Amendment was amended in Section 9 and, in what some commentators call the most important single action taken during the entire war period, it raised the support level of the Steagall commodities from 85% to 90%.
It also extended to those commodities the same postwar parity price guarantees (90%) that had been specified for the basic crops covered in Section 8 (cotton, corn, wheat, rice and peanuts), for the two years immediately succeeding the first day of January following a presidential or congressional declaration that hostilities had ceased. It was this guarantee of a reasonable parity price that would enable American agriculture to maintain for nearly a decade an unmatched period of general prosperity.
It is curious that later, about the time the concept "agribusiness" was coming out of the closet and into common usage at the dawn of the Republican era, there existed a sharp division within the farm community and between Democrats and Republicans concerning high price supports. It was a lame duck President Harry S. Truman, therefore, early in 1952 who would ask Congress for a repeal in the sliding price support scale established in the controversial Agricultural Adjustment Act of 1949.
Congress responded to Truman`s appeal by voting to set price supports for basic commodities at 90% of parity through April 1953, unless a producer referendum disapproved of marketing quotas. Immediately prior to the 1952 elections the legislators extended such provisions through 1954.
At about this same time a group of agricultural economists were recommending the following in a Farm Foundation report:
"If the effort to equalize income (of farm and non-farm) groups takes the form of continuous cash supplements or subsidies rather than returns for the market, this means that resources, especially labor resources are being used in agriculture when they could be used more profitably in other lines ... We must, therefore, seek better means for promoting economic equality for agriculture."
Specifically the report suggested, among other things, free market-clearing prices and the scrapping of the parity price formula (that had been used in farm legislation since 1932); ready and equal access to capital (i.e., credit) for all producers; and free managerial choices (i.e., free from government regulatory control).
It was also in this same time period that the Committee for Economic Development began issuing a series of reports evaluating agriculture and spelling out the direction it should take in the future. Basically they called for eliminating agriculture's "excess human resources" (i.e., farmers).
After the Republicans' 1952 victory, however, although still legally bound to keep the 90% support level throughout 1954, USDA Secretary Ezra Taft Benson attempted a quick repeal of the measure. At a June 19, 1953 cabinet meeting he suggested that the Eisenhower administration seek a congressional resolution permitting the immediate lowering of price supports. Despite his suggestion and continuing pressure for such a resolution, Eisenhower refused to heed his secretary's advice, arguing in typical Ike fashion for "gradualism."
Eventually, however, Benson and the advocates of "flexible price supports" won the day and effectively ended a decade-long period of relative agricultural prosperity.
In reflecting on that time ten years later, Rep. Harold D. Cooley, chairman of the House Agriculture Committee told an Independent Bankers Association meeting in 1964:
"For 11 consecutive years prior to 1953 the average prices paid to farmers were at or above 100% of parity with the rest of the economy. There was prosperity on the farms -- and along Main Street. Rural America -- the countryside and Main Street -- looked secure then for all the years ahead."
The North Carolina representative pointed out that the government, with broad cooperation from farmers, supported the prices of major storable crops for 20 years at an actual profit of $13 million, making this profit by selling the commodities such as wheat, corn, cotton, tobacco, rice and peanuts that it had taken over during its price-supporting operations.
"Those who deprecate the role of the farm program in this great era of farm prosperity emphasize that this period embraced war and postwar years, when the demands for the products of our farms were high, but they ignore the fact the markets, at home and abroad, for farm commodities have been greater in the last ten years than during any period of our history, and they forget that the farm economy collapsed after World War I, and this did not occur following World War II when the farm program was working."
By way of illustration he recounted to his banker audience that in the ten years between 1953 and 1962 inclusive, while all other segments of the economy had been booming, net income for agriculture had been $25 billion less than in the previous ten years. Meanwhile, USDA had been spending in the previous ten years $35 billion more than in the 1943 to 1952 period. The costs from 1953 to 1962 were almost $20 billion more than all expenditures of the department's previous 90 years of existence.
"For 11 years -- 1942 through 1952 -- - farmers had bargaining power in the market place. Supply and demand were in reasonable balance and farmers enjoyed price insurance through the farm program ... Many farmers have turned against their own program -- - the program that prevailed during the years of our greatest era of prosperity. Why, and for what reason, I shall never understand. Farmers have lost bargaining power in the market place, and 100% of parity for agriculture -- generally approved and accepted by the public a decade ago -- is hardly any more a dream."
After his address Rep. Cooley remarked to one banker that he felt it was none other than the American Farm Bureau Federation who had been responsible for gutting the Steagall Amendment farm price support program, the very program many farmers believed accounted for their 1942-1952 prosperity. The Farm Bureau had successfully convinced the agricultural establishment's economists that the farm price support program was "un-American," and ultimately would lead to "socialism," or worse, "communism."
A.V. Krebs is director of the Corporate Agribusiness Research Project, PO Box 2201, Everett, WA 98203. He publishes a free email newsletter, The Agribusiness Examiner. Email avkrebs@earthlink.net; website www.ea1.com/CARP/