Agricultural Adjustment Act
On 6th April, 1917, America joined the First World War against Germany. President Woodrow Wilson appointed Herbert Hoover as head of the United States Food Administration, an agency responsible for the administration of the U.S. army overseas and allies' food reserves. The new law forbade hoarding, waste, and "unjust and unreasonable" prices and required businesses to be licensed. During this period "Hooverize" entered the dictionary as a synonym for economizing on food. (1)
One senator protested that President Wilson had given Hoover "a power such as no Caesar ever employed over a conquered province in the bloodiest days of Rome's bloody despotism". Hoover replied that, "Winning a war requires a dictatorship of some kind or another. A democracy must submerge itself temporarily in the hands of an able man or an able group of men. No other way has ever been found." (2)
Hoover's main objectives was to persuade farmers to grow more and grocery shoppers to buy less so that surplus food should be sent to America's overseas allies. Hoover established set days for people to avoid eating specified foods and save them for soldiers' rations. For example, people were told not to eat meat on Mondays. In January, 1918, Hoover announced "the law of supply and demand... had been suspended." (3)
As head of the Food Administration's Grain Corporation, he informed millers that if they did not sell flour to the government at a price he determined, he would requisition it, and he told bakers they must make "victory bread or close." In another speech Hoover argued: "The law is not sacred... Its unchecked operation might even jeopardize our success in war... It is imperative... that economic thinkers denude themselves of their procrustean forumulas of supply and demand... for in a crisis... government must necessarily regulate the price, and all theories to the contrary go by the board." (4)
Agriculture in the 1920s
As a result of these measures farmers enjoyed rising prices and profits during the final stages of the war. This led to increased output and farmers borrowed heavily to expand their acreage. For example, gross farm income in 1919 amounted to $17.7 billion. However, after the war European agriculture recovered and American farmers found it more difficult to find export markets for their goods. As a result prices began to fall and by 1921 total farm incomes amounted to only $10.5 billion.
In September 1922, the Fordney-McCumber Act was signed by President Warren Harding. These raised tariffs to levels higher than any previously in American history in an attempt to bolster the post-war economy, protect new war industries, and aid farmers. Over the next eight years it raised the American ad valorem tariff rate to an average of about 38.5% for dutiable imports and an average of 14% overall. It has been claimed that the tariff was defensive, rather than offensive. (5)
Most of American trading partners had raised their own tariffs to counter-act this measure. The leaders of the Democratic Party had opposed tariffs and argued that it was to blame for the agricultural depression that took place during the 1920s. Senator David Walsh pointed out that farmers were net exporters and so did not need protection. He explained that American farmers depended on foreign markets to sell their surplus. The price of farming machinery also increased. For example, the average cost of a harness rose from $46 in 1918 to $75 in 1926, the 14-inch plow rose from $14 to $28, mowing machines rose from $45 to $95, and farm wagons rose from $85 to $150. Statistics of the Bureau of Research of the American Farm Bureau that showed farmers had lost more than $300 million annually as a result of the tariff. (6)
Although agriculture sector had problems during the 1920s, American industry prospered. The real wages of industrial workers increased by about 10 per cent during this period. However, productivity rose by more than 40%. The farming community did not enjoy the benefits of this growing economy. As Patrick Renshaw has pointed out: "The real problem was that in both agricultural and industrial sectors of the economy America's capacity to produce was tending to outstrip its capacity to consume." (7)
Herbert Hoover and the Republicans believed the Forder-McCumber tariffs had helped the American economy to grow. William Borah, the charismatic senator from Idaho, widely regarded as a true champion of the American farmer, had a meeting with Hoover and offered to give him his full support if he promised to increase tariffs of agricultural products if elected. (8) Hoover agreed with the proposal and during the campaign promised the American electorate that he would increase the tariff. (9)
After his election Hoover asked Congress for an increase of tariff rates for agricultural goods. The Smoot-Hawley Act was passed in the Senate on a vote of 44 to 42, with 39 Republicans and 5 Democrats voting in favor of the bill. Hoover signed the bill on 17th June, 1930. The Economist Magazine argued that the passing of the Smoot–Hawley Tariff Act was "the tragic-comic finale to one of the most amazing chapters in world tariff history… one that Protectionist enthusiasts the world over would do well to study.” (10)
The Great Depression
By 1933 agriculture in America was in a terrible state. For example, per capita farm income was one quarter that of non-farmworkers. Farm prices fell by 53 per cent from 1929 to 1932. Net farm income was down by 70 per cent. "A cow that sold for $83 in 1929 now brought $28. Cotton sold for six cents a pound. Corn in Nebraska brought thirty-one cents a bushel, Kansas wheat thirty-eight cents. By early 1933, 45 per cent of all farm mortgages were delinquent and facing foreclosure." (11)
Harry Terrell was brought up on a farm in South Carolina: "320 acres of farm land, fine land, that my uncle owned and cleared, he lost it because they foreclosed the mortgage. Some of the best in the state, and he couldn't borrow a dime. The farmers didn't have anything they could borrow on...Corn was going for eight cents a bushel. One county insisted on burning corn to heat the courthouse because it was cheaper than coal... The county was getting up in arms about taking a man's property away from him. It was his livelihood. When you took a man's horses and his plow away, you denied him food, you just convicted his family to starvation." (12)
Oscar Heline was someone who was forced into bankruptcy by the Great Depression: "First, they'd take your farm, then they took your livestock, then your farm machinery. Even your household goods. And they'd move you off... In South Dakota, the county elevator listed corn as minus three cents. Minus three cents a bushel. If you wanted to sell 'em a bushel of corn, you had to bring in three cents. They couldn't afford to handle it." (13)
Henry A. Wallace was appointed as Secretary of Agriculture. Rexford G. Tugwell, became assistant secretary. Tugwell wrote that "Since my graduate-school days, I have always been able to excite myself more about the wrongs of farmers than those of urban workers." (14) The authors of American Dreamer: A Life of Henry A. Wallace (2001) has commented: "They presented a rather odd picture together - the dapper Columbia University professor and the tousled Iowa editor - but they made a good team. They were men of ideas and shared a vision of government that was activist and progressive. Wallace knew the practical aspects of American farming in the way a sailor knew the stars. And Tugwell knew Franklin Roosevelt." (15)
Agricultural Adjustment Act
Wallace and Tugwell drafted what became known as the Agricultural Adjustment Act. The plan was to raise farm income by reducing agricultural surpluses through a system of domestic allotments. Farmers would be paid directly by the government not to produce crops beyond an allotment set by the secretary of agriculture. The proposal aimed to deal with the crucial problem of depressed prices and mounting surpluses. (16)
Calvin Benham Baldwin was one of those employed by Wallace to help solve these problems. "The Agricultural Adjustment Administration (AAA) came into being shortly after I got to Washington. Its purpose was to increase farm prices, which were pitifully low. All the farmers were in trouble, even the big ones. Hog prices had just gone to hell. They were four, five cents a pound? The farmers were starving to death. It was decided to slaughter piggy sows (a pregnant pig). The AAA decided to pay the farmers to kill them and the little pigs. Lot of them went into fertilizer. You had a similar situation on cotton. Prices were down to four cents a pound and the cost of producing was probably ten. So a program was initiated to plow up cotton. A third of the crop, if I remember. Cotton prices went up to ten cents, maybe eleven." (17)
On 11th March, Henry A. Wallace commented: "The farm leaders were unanimous in their opinion that the agricultural emergency calls for prompt and drastic action.... The farm groups agree that farm production must be adjusted to consumption, and favor the principles of the so-called domestic allotment plan as a means of reducing production and restoring buying power." The conference also called for emergency legislation granting Wallace extraordinarily broad authority to act, including power to control production, buy up surplus commodities, regulate marketing and production, and levy excise taxes to pay for it all. (18)
President Roosevelt sent the first genuine New Deal measure to Congress on 16th March, 1933. It was a radical departure, suggesting government control of agricultural production, historically the most individualistic segment of the economy. Roosevelt admitted that the Agricultural Adjustment Act was a great departure from previous legislation: "I tell frankly that it is a new and untried path, but I tell you with equal frankness that an unprecedented condition calls for the trial of new means to rescue agriculture." (19)
The House of Representatives passed the Agricultural Adjustment Act without any amendments, but the Senate was not so convinced. The measure shocked conservatives and upset those who had to pay the proposed processing tax. Joseph W. Martin of Massachusetts claimed that it the bill passed it would "put America on the road to Moscow". Frank Freidel, the author of Franklin D. Roosevelt: A Rendezvous with Destiny (1990) pointed out that "others plastered a red label on Roosevelt's agricultural experts, or denounced them as professors who had no knowledge of farm realities." (20)
On 27th April at Le Mars in Plymouth County, a mob of six hundred farmers marched on the local courthouse. A spokesman for the group asked the judge to promise that he would not sign any more foreclosure orders. Judge Charles C. Bradley said he had as much sympathy for the farmers who had lost their property, but that he did not make the laws. The men did not like this answer and dragged Bradley of his courtroom and taken to a crossroads outside of town, where his trousers were removed and he was threatened with mutilation. A noose was pulled tight around his neck, and the mob demanded that the strangling judge promise no further foreclosures. The sixty-year old Bradley bravely replied: "I will do the fair thing to all men to the best of my knowledge." Bradley was just about to be hanged when he was saved by a local newspaper editor who had just arrived in his car. (21)
At the same time, some radicals, such as Burton Wheeler and Lynn Frazier, argued that the farmer deserved nothing less that government guarantee of his "cost of production". Tugwell observed: "For real radicals such as Wheeler, Frazier, etc., it is not enough; for conservatives it is too much; for Jefferson Democrats it is a new control which they distrust. For the economic philosophy which it represents there are no defenders at all. Nevertheless, in spite of everything, it will probably become law." It was passed on 10th May, 1933. (22) An editorial in The New York Herald Tribune argued: "Seldom, if ever, has so sweeping a piece of legislation been introduced in the American Congress". (23)
Henry A. Wallace
John C. Culver and John C. Hyde, the authors of American Dreamer: A Life of Henry A. Wallace (2001) have pointed out: "The sense of urgency was hardly theoretical. A true crisis was at hand. Across the Corn Belt, rebellion was being expressed in ever more violent terms. In the first two months of 1933, there were at least seventy-six instances in fifteen states of so-called penny auctions, in which mobs of farmers gathered at foreclosure sales and intimidated legitimate bidders into silence. One penny auction in Nebraska drew an astounding crowd of two thousand farmers. In Wisconsin farmers bent on stopping a farm sale were confronted by deputies armed with tear gas and machine guns. A lawyer representing the New York Life Insurance Company was dragged from the courthouse in Le Mars, Iowa, and the sheriff who tried to help him was roughed up by a mob." (24)
Most farmers were very pleased by the passing of the Agricultural Adjustment Act. Harry Terrell claims: "Henry Wallace and his granary was the man who saved the farmer... They took this corn and paid for it and stored it. They put a price on it that was above the miserable going price." (25) Oscar Heline agrees "It was Wallace who saved us, put us back on our feet. He understood our problems." Heline was in a group of farmers who went to see Henry A. Wallace: "He made it clear to us he didn't want to write the law. He wanted the farmers themselves to write it... He would always give his counsel, but he never directed us. The program came from the farmers themselves." (26)
The American Communist Party were active in rural areas, including Ella Reeve Bloor, who according to one historian "set up shop in hard-hit rural areas and began dispensing doughnuts and Marxist ideology". However, the main problem for Wallace was Milo Reno, the leader of the Farmers' Holiday Association. He had not been invited to Wallace's emergency farm conference and instead he led some three thousand disgruntled farmers on a march to the state capitol in Des Moines, where he issued a sweeping list of demands and vowed to mount a nationwide farm strike if they were not met. (27)
The Farm Credit Administration was established on 27th March, 1933. It was a merger of government farm loan agencies under the control of Henry Morgenthau. On 16th June, 1933, Congress passed the Farm Credit Act, attempted to deal with the problem of farm mortgages. Over the next eighteen months it would refinance a fifth of all farm mortgages. (28)
Gene Elderman, Washington Post (June, 1933)
Roosevelt later recalled that the establishment of the Farm Credit Administration was a great success as they needed to action to prevent people losing their farms. "We saved farms from foreclosure through the Home Owners' Loan Corporation and the Farm Credit Administration. I suppose some people today would like to repeal all that and go back to the conditions of 1932, when the people out West mobbed a Federal Judge because he was trying to carry out the existing law of the land in foreclosing a farm." (29)
Wallace controversially agreed that hog farmers should be allowed to slaughter pigs weighing less than one hundred pounds instead of allowing them to reach their usual market weight of two hundred pounds. It was argued that pigs would be reduced by five or six million, prices would rise, and the edible portions of the pigs could be used to feed the hungry. William E. Leuchtenburg, has pointed out: "Wallace reluctantly agreed to a proposal of farm leaders to forestall a glut in the hog market by slaughtering over six million little pigs and more than two hundred thousand sows due to farrow. While one million pounds of salt pork was salvaged for relief families, nine-tenths of the yield was inedible, and most of it had to be thrown away. The country was horrified by the mass matricide and infanticide. When the piglets overran the stockyards, and scampered squealing through the streets of Chicago and Omaha, the nation rallied to the side of the victims of oppression, seeking to flee their dreadful fate." (30)
Newspapers denounced Wallace's plan as "pig infanticide". Wallace was surprised by the criticism as it is "just as inhumane to kill a big hog as a little one". Wallace added: "To hear them talk, you would have thought that pigs are raised for pets. Nor would they realize that the slaughter of little pigs might make more tolerable the lives of a good many human beings being dependent on hog prices." Some one million pounds of pork, and pork by-products, such as lard and soap, was distributed to poor. Wallace pointed out: "Not many people realized how radical it was - this idea of having the Government buy from those who had too much, in order to give to those who had too little." (31)
George N. Peek and Chester R. Davis
Roosevelt attempted to placate conservatives by appointing George N. Peek as head of the Agricultural Adjustment Administration (AAA). He also appointed Jerome Frank as general council to the AAA. Peek clashed with both Wallace and Frank. John C. Culver and John C. Hyde, the authors of American Dreamer: A Life of Henry A. Wallace (2001) have argued that Peek never liked Jerome Frank and wanted to appoint his own general council: "Crusty and dogmatic, Peek still seethed with resentment over Wallace's appointment as secretary, a position he coveted... Frank was liberal, brash, and Jewish. Peek loathed everything about him. In addition, Frank surrounded himself with idealistic left-wing lawyers... whom Peek also despised." (32) This group of left-wing idealists included Frederic C. Howe, Adlai Stevenson, Alger Hiss, Lee Pressman, Hope Hale Davis and Gardner Jackson. Peek later wrote that the "place was crawling with... fanatic-like... socialists and internationalists." On another occasion he called the men "Lenin chicks". (33)
The conflict between Peek and the young liberals in the AAA continued. Peek's main objective was to raise agricultural prices through cooperation with processors and large agribusinesses. Other members of the Agricultural Department such as Jerome Frank were primarily concerned to promote social justice for small farmers and consumers. On 15th November, 1933, Peek demanded that Wallace should fire Frank for insubordination. Wallace, who agreed more with Frank than Peek, refused. Peek was also hostile to Rexford Tugwell, who believed that Peek was an anti-Semite." (34)
George Peek became completely disillusioned with the Agricultural Adjustment Act (AAA). He wrote in his autobiography, Why Quit Our Own? (1936): "There is no use mincing words... The AAA became a means of buying the farmer's birthright as a preliminary to breaking down the whole individualistic system of the country." However, it was clear that President Franklin D. Roosevelt supported Wallace over Peek and decided to resign from the AAA on 11th December, 1933. (35)
Peek was replaced by Chester R. Davis. He also came into conflict with these young radicals. In February 1935, Davis insisted that Jerome Frank and Alger Hiss should be dismissed. Wallace was unable to protect them: "I had no doubt that Frank and Hiss were animated by the highest motives, but their lack of agricultural background exposed them to the danger of going to absurd lengths... I was convinced that from a legal point of view they had nothing to stand on and that they allowed their social preconceptions to lead them to something which was not only indefensible from a practical, agricultural point of view, but also bad law." (36)
Henry A. Wallace
Chester R. Davis told Jerome Frank : "I've had a chance to watch you and I think you are an outright revolutionary, whether you realize it or not". Wallace wrote in his diary: "I indicated that I believed Frank and Hiss had been loyal to me at all times, but it was necessary to clear up an administrative situation and that I agreed with Davis". According to Sidney Baldwin, the author of Poverty and Politics: The Rise and Decline of the Farm Security Administration (1968), Wallace greeted Frank with tears in his eyes: "Jerome, you've been the best fighter I've had for my ideas, but I've had to fire you... The farm people are just too strong." (37)
Rexford Tugwell attempted to protect Frank and Hiss and received support from Louis Howe and Harry Hopkins: "I went and talked to Harry Hopkins who was outraged, to Louis Howe who was sympathetic, to Henry Wallace who was red-faced and ashamed, and to the President. My first impulse was to resign... I made up my mind that Jerome must have justice." (38) Roosevelt refused to let him go and agreed to appoint Frank as a special counsel to the Reconstruction Finance Association. (39)
Primary Sources
(1) New Republic Magazine (1932)
Beginning in the Carolinas and extending clear into New Mexico are fields of unpicked cotton that tell a mute story of more cotton than could be sold for enough, even to pay the cost of picking. Vineyards with grapes still unpicked, orchards of olive trees hanging full of rotting fruits and oranges being sold at less than the cost of production.
(2) Oscar Heline, interviewed by Studs Terkel, in Hard Times: An Oral History of the Great Depression (1970)
Grain was being burned. It was cheaper than coal. In South Dakota, the county elevator listed corn as minus three cents a bushel. If you wanted to sell them a bushel of corn, you had to bring in three cents. We had lots of trouble on the highway, people were determined to withhold produce from the market - livestock, cream, butter, eggs, what not. If they would dump the produce, they would force the market to a higher level. The farmers would man the highways and cream cans were emptied in ditches and eggs dumped out. They burned the Trestie Bridge, so the trains wouldn't be able to haul grain.
(3) Calvin Benham Baldwin, interviewed by Studs Terkel, in Hard Times: An Oral History of the Great Depression (1970)
The New Deal was an uneasy coalition. Fights developed very early between two factions: one, representing the big farmers, and the other, the little farmers. The Agricultural Adjustment Administration (AAA) came into being shortly after I got to Washington. Its purpose was to increase farm prices, which were pitifully low. All the farmers were in trouble, even the big ones.
Hog prices had just gone to hell. They were four, five cents a pound? The farmers were starving to death. It was decided to slaughter piggy sows (a pregnant pig). The AAA decided to pay the farmers to kill them and the little pigs. Lot of them went into fertilizer. Then a great cry went up from the press, particularly the Chicago Tribune, about Henry Wallace slaughtering these little pigs. You'd think they were precious babies.
You had a similar situation on cotton. Prices were down to four cents a pound and the cost of producing was probably ten. So a program was initiated to plow up cotton. A third of the crop, if I remember. Cotton prices went up to ten cents, maybe eleven.
(4) Herbert Hoover, interview quoted in the The New York Times (31st October, 1936)
I rejected the schemes of economic planning to regiment and coerce the farmer. That was born of a Roman despot 1400 years ago and grew into the AAA. I refused national plans to put government into business in competition with its citizens. That was born of Karl Marx. I vetoed the idea of recovery through stupendous spending to prime the pump. That was born of a British Professor (John Maynard Keynes).
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