America's Great Depression (39 page)

Meanwhile, in corn, Henry A. Wallace, editor of
Wallace’s
Farmer
, preached the gospel of “sagacious sabotage,” a presumably voluntary way to restrict corn production. The campaign got nowhere among the farmers in 1921, but Wallace tried again in 1922 and urged the state Farm Bureau Federations, with indifferent success, to fix systematic township and county acreage quotas for corn. Several farm journals and organizations endorsed the idea, but the major farm leaders were repelled by the idea of formal farm quotas.12 The result was failure once more, the Corn Belt even increasing its acreage of corn.

The chief stumbling block in all these schemes was the nonco-operating farmer, the rugged individualist who profited by expanding his production while his rival farmers cut theirs. Unlike his counterparts in industrial labor, he was not deterred by such favored epithets of frustrated cartellists as “scab” and “traitor to his fellow-farmers,” hurled at him by such organs as
Wallace’s Farmer
.

The next step in the drive for a farm cartel was the “Sapiro Movement,” inspired by Aaron Sapiro, a high-priced young attorney for several California cooperatives. The plan was launched, under Sapiro’s inspiration, by the Farm Bureau Federation in July, 1920. It aimed to amalgamate all of wheat marketing into one giant producers’ cooperative. The July conference appointed a 11It may surprise many to learn that much of the cartel agitation came not from cotton farmers. It came from the merchants and bankers with large inventories of cotton on hand, and who would not suffer from reductions in acreage.

Ibid., p. 85.

12The Iowa Farm Bureau Federation resolved in January, 1922 to present the facts on reduction of corn acreage to its membership, but added that “we entrust each farmer to adjust his acreage in accordance with his own judgment.” Ibid., p.

87.

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committee which produced, in the spring of 1921, a plan for a huge national grain cooperative to be called U.S. Grain Growers, Inc.13 As almost always happens with voluntary cartels, the new organization bogged down almost immediately. Many local cooperative farm elevators preferred dealing with existing private markets, and the private grain exchanges successfully wooed the bulk of the farmers into avoiding the new cartel. By early 1922, the grandiose scheme had proven to be a complete failure.14

The July 1920 conference also tried to set up numerous other national cartels—for national fruit marketing, dairy marketing, vegetable marketing, and wool marketing—and all but one were quick failures. Only a livestock marketing plan had staying power, and this because its aims were much less grandiose. Other Sapiro failures were attempts at cotton and tobacco cartels.

These failures did not end the cooperative movement, which had to turn to less flamboyant and more gradual methods; but they did show the folly of voluntary price-fixing. The next step was almost inevitable—a determined call for compulsory price-support by the federal government.

A precedent had been set by the wartime Food Administration Grain Corporation, which had fixed high prices of wheat in order to stimulate production and had itself distributed the wheat available. Furthermore, the Hoover European food relief program of 1919, widely trumpeted as a humanitarian gesture, was also a means of getting rid of “surplus” farm products and thus bolstering food prices.15 William H. Lyon, a South Dakota attorney, now proposed that the government fix a high price for every farm product and buy up any unsold surplus. The Lyon Plan won the support 13See Benedict,
Farm Policies of the Unitd States 1790–1950,
pp. 186n. and 194ff.

14In 1924, Gray Silver, powerful Washington lobbyist for the farm bloc, attempted another national grain cooperative, setting up the Grain Marketing Company (GMC). The GMC aimed at becoming a holding company of the major private grain marketing firms, but farmers failed to support the plan, and the company died a year later.

15See Shideler,
Farm Crisis 1919–1923,
p. 21.

The Depression Begins: President Hoover Takes Command
225

of Samuel Gompers, the South Dakota Assembly, many country banks, and the Republican whip in the House of Representatives.

It was put forth as the Christopherson Bill in July, 1921, but failed to win the support of the major farm organizations, as did other price-support bills in this and immediately following years. But the drive for compulsory price support had not begun in earnest. It reached major importance in the “Equality for Agriculture” movement, launched in the fall of 1921 by George N. Peek and General Hugh S. Johnson and backed by the powerful support of Bernard M. Baruch. The idea was that since industry was protected by tariffs, agriculture might as well join in mulcting the consumer. The government was to maintain domestic farm prices at a high level, buying the unsold surplus and selling it abroad at lower, world-market levels. Both Peek and Johnson had direct economic interests in farm subsidies as heads of the Moline Plow Company, manufacturers of agricultural machinery. They found little difficulty in interesting Secretary Wallace in their scheme, and the result was a continuing agitation over McNary–Haugen bills, embodying the plan, from 1924 through 1928. The first McNary–Haugen Bill was drawn up by Charles J. Brand, an executive of the American Fruit Growers and former head of the Bureau of Markets in the USDA.

The original mass base of Peek’s support was the marginal wheat farmers of the Northwest, backed by the bankers of that region.

Eugene Meyer, Jr. also lent his powerful backing. In 1924, Peek established the American Council of Agriculture, with representatives from the leading farm groups, to advocate his plan. By the late 1920s, the mass farm organizations were solidly behind the program.16

It is true that President Coolidge vetoed McNary–Haugen Bills in 1927 and 1928, but it is also significant that he called upon Eugene Meyer in 1926 to head a cotton corporation to try to keep cotton prices from falling and that grants totaling $10 million were 16By 1924, in addition to Peek, Johnson, the two Henry Wallaces—father and son—and Bernard Baruch, in support of McNary–Haugen there were the Illinois Agricultural Association, most Western farm journals, the American Farm Bureau Federation, the National Grange, the National Board of Farm Organizations, the American Wheat Growers’ Association, and the prominent banker Otto H. Kahn.

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America’s Great Depression

made to government-sponsored farm organizations to buy cotton at a certain price. Other countries—such as Canada, Hungary, and Poland—were also trying to keep up the price of wheat; but the threat of growing surpluses over the market had the reverse effect and drove prices lower in 1928 and 1929, inducing a farm clamor for more effective price support.

There were many other instances of Coolidge intervention in agriculture. In 1924, he supported the Norbeck–Burtness Bill for government loans to northwestern farmers for livestock purchases.

The bill failed to pass Congress, but Coolidge proceeded to appoint a special agricultural commission, heavily weighted with farm leaders. The commission—The President’s Agricultural Conference—issued three reports during 1925. It recommended further Farm Loan Board credits, further compulsory reduction of freight rates, and large-scale subsidization of farm cooperatives through a Federal Cooperative Marketing Board. The latter provision was embodied in the Capper–Haugen Bill, which was however defeated by the opposition of the farm coops, who objected to the great degree of government regulation involved. Despite this defeat, President Coolidge was more determined than ever to aid the farm coops in any way that he could. Coolidge firmly believed that government “must encourage orderly and centralized marketing” in agriculture.17 Herbert Hoover and Secretary of Agriculture William Jardine (a member of the President’s Agricultural Conference) agreed with Coolidge. In 1925, the Congress granted additional funds for subsidizing the marketing research of farm cooperatives, and the following year, prompted by Secretary Jardine, it established a Division of Cooperative Marketing in the Bureau of Agricultural Economics in the USDA. The new Division then threw itself with enthusiasm into support of the farm coops.
This
kind of intervention was of course welcomed by the coops. In 1926, Jardine sponsored the “Jardine Plan” for a federal farm advisory council and a farmers’ marketing commission to subsidize 17See Saloutos and Hicks,
Agricultural Discontents in the Middle West,
1900–1939,
pp. 286–91; and John D. Black,
Agricultural Reform in the United
States
(New York: McGraw–Hill, 1929), pp. 337, 351ff.

The Depression Begins: President Hoover Takes Command
227

cooperatives and to aid in marketing farm surpluses. The bill failed to pass the House, which instead adopted the McNary–Haugen Bill. The next year, the Coolidge administration brought out a revised “Jardine Plan,” for a Farm Board, commodity advisory committees, and a set of stabilization corporations established by the Board, with funds to lend to cooperatives. The new plan was again sidetracked for another round in the McNary–Haugen battle.

As Secretary of Commerce, Herbert Hoover did a great deal to subsidize farmers, and especially farm coops. He aided the latter in many ways—solving their research and marketing problems, helping find export markets for their produce, and making many speeches on their behalf. He also supported tariffs for agricultural produce. Furthermore, he was the man chiefly responsible for the appointment of the strongly pro-cooperative Secretary Jardine.

Hoover had been one of the earliest proponents of a Federal Farm Board to aid cooperative marketing associations, and he helped write the Capper–Williams Bill of 1924 to that effect. And so it is no surprise that, as Presidential candidate, Hoover advocated support for farm cooperatives and promised the farm bloc that he would soon institute a farm-price support program. As soon as he took office, he fulfilled both promises, In June 1929, the Agricultural Marketing Act was passed, establishing the Federal Farm Board (FFB).

The new scheme was, in essence, the old “Jardine Plan.” The Federal Farm Board was furnished with $500 million by the Treasury and was authorized to make all-purpose loans, up to a 20-year period, to farm cooperatives at low interest rates. The Board could also establish stabilization corporations to control farm surpluses and bolster farm prices. Essentially, this was a Sapiro-type cartel, this time backed by the coercive arm of the federal government.18

18Behind the scenes, Bernard Baruch had also been advocating a Federal Farm Board to raise farm prices by organizing agriculture under government aegis, starting with wheat and cotton. He was also active in urging Commerce and the National Industrial Conference Board, Commission on Agriculture, jointly established by the U.S. Chamber of Commerce and the National Industrial Conference Board. The Commission was sure that
“
laissez-faire is of the past.” See Dorfman,
The Economic Mind in American Civilization
, vol. 4, pp. 79–80.

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Hoover appointed, as chairman of the FFB, Alexander Legge, president of International Harvester Co., and long-time protégé of Bernard M. Baruch. International Harvester was one of the leading manufacturers of farm machinery, and therefore Legge, like George Peek, had a direct economic interest in farm subsidization.

Other members of the FFB included the Secretary of Agriculture, Arthur M. Hyde; James C. Stone, vice-chairman and founder of the Burley Tobacco Growers’ Cooperative Association; Carl Williams, a cotton grower of the Farmers’ Cooperative Association; C.B. Denman of the National Livestock Producers’ Association; C.C. Teague of the Fruit Growers’ Exchange; William F.

Schilling of the National Dairy Association; Samuel McKelvie, publisher of the
Nebraska Farmer
, representing the grain interests; and Charles S. Wilson, Professor of Agriculture at Cornell University. It is clear that the Board was dominated by representatives of the very farm cooperatives that it was organized to favor and support.19 Thus, the Hoover administration established a giant agricultural cartel, directed by government, and run by and for the benefit of the cartellists themselves.

As the depression struck, the FFB went into action. Its first big operation was in wheat, prices of which had been falling sharply for over a year. When first established, in August, the FFB advised farmers not to send wheat forward to market too rapidly, but rather to hold wheat in order to wait for higher prices. In September, it made additional loans to cooperatives to withhold stocks and raise prices. Yet the wheat price continued to fall sharply. On October 26, shortly after the stock market crash, the FFB announced that it would lend $150 million to wheat coops, at up to 100 percent of the market price, to try to hold up prices by keeping wheat off the market. Soon after the stock market crash, the FFB established a Farmers’ National Grain Corporation, with a capital of 19“Hoover chose the Board members from men proposed by farm organizations, as requested by the administration.” See Edgar E. Robinson, “The Hoover Leadership, 1929–1933” (unpublished manuscript), pp. 128ff. After the first year of operations, Legge retired and Stone became chairman. Teague and McKelvie were replaced by two former high officials in the American Farm Bureau Federation, Frank Evans and the aggressive Sam H. Thompson.

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$10 million, to centralize cooperative marketing in wheat and other grains. The old dream of a wheat cartel had at last come true.

The FFB was supposed to work largely through such “corporations,” or favored farm marketing cooperatives; and the Farmers’

National was selected to centralize all farmers’ grain cooperatives, eliminate competition among them, and thus stabilize and raise the market price. At first, the FFB and Farmers’ National loaned money to farm cooperatives to hold wheat off the market, then, after prices continued to fall, the Farmers’ National itself began to buy wheat at the loan prices.