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Title: The Ideological and Institutional Foundations of Modern Agriculture


1
The Ideological and Institutional Foundations of
Modern Agriculture Part II
  • Ecological Agriculture Program
  • October 21, 2003
  • Chad Kruger

2
Introduction
  • The federal government has played an integral
    role in the development of US agriculture.
  • In the Jefferson vs. Hamilton/Madison debate we
    learn that there are opposing reasons for
    government involvement in agriculture 1) that
    farming cultivates a character quality
    beneficial to civic democracy or 2) that
    agricultural development is a means to an end of
    industrial and commercial development.
  • During and after the Civil War, the government
    attempts to redirect the vision of the country
    from the civil conflict to westward expansion,
    opportunity and growth. A number of key
    institutions are established in the midst of
    the civil conflict to promote the ideological
    values and physical pioneering and colonization
    of the west.

3
Introduction
  • In this lecture we are going to discuss the
    continued and expanded partnership (or
    marriage) between government and private
    interests in the development of agriculture in
    the US.
  • Three key events or sets of events have laid
    the groundwork for the interlocked relationship
    between the Federal government and the
    agricultural sector today
  • The Great Depression and the New Deal
  • World War II - increased industrial capacity and
    new world role of the US.
  • 80s farm crisis and the neo-liberal economic
    revolution

4
The New Deal Causes of the Great Depression
  • Stock Market Crash
  • Commoners were investing in the stock market for
    the very first time.
  • This is the first public heyday of stock
    market investing in our countries history. The
    country (and world) was recovering from WWI.
    Electricity had reached most urban consumers, and
    the market for electric goods (radios, washing
    machines, etc.) was strong, as was the market for
    the automobile (GM had introduced pay as you
    drive financing that made car ownership
    possible).
  • Conditions of market were exacerbated because
    stocks could be purchased on the margin.
  • (ie. one could purchase stock on percentage
    10 of the value, using that 10 as collateral
    for the purchase of the rest of the stock on
    credit.) When the stock would rise, you would
    cash out and pay the remainder of the credit from
    the sale. This works as long as the value of the
    stock rises.

5
The New Deal Causes of the Great Depression
  • Financial Panic
  • On October 29, 1929 (after of week of crashes
    and recoveries), traders/bankers started calling
    in the margins on investors (requiring investors
    to pay for the losses of their stocks in cash)
  • created a selling fever and ultimately the
    stock market crash.
  • Financial panic created a deflationary spiral
    .
  • of extreme consequence is the fact that
    ordinary people, for the first time, were largely
    involved in capital investment consumer
    confidence was shattered, demand for products
    dropped, retailers had to move inventory at heavy
    losses, industry suffered heavy losses in
    production and had to lay off laborers, deflation
    hurt debtors by increasing the real costs of
    debt, banks couldnt collect and there was no
    value in foreclosing on assets, banks collapsed
    taking good solvent people down with them.

6
The New Deal Causes of the Great Depression
  • Agriculture
  • We know that farmers were already dealing with
    difficult times in the 20s due to price
    corrections following WWI. Many had large debt
    burdens from purchasing land, which were
    exacerbated by expenses incurred in technology
    adoption (tractors and machinery became widely
    available in the 20s). Many of the Ag of the
    Middle farms/farmers had been squeezed out.
  • The crash of the stock market exacerbated the
    situation for farmers as well. Demand for food
    and fiber dropped (how can demand for food drop?)
    Southern cotton prices dropped as demand for new
    clothes dropped. Demand for higher value
    agricultural products (meats, etc.) dropped
    considerably. Meatless meatballs example.
    Meats, dairy, fruits and veggies drop. Export
    markets drop.

7
The New Deal Causes of the Great Depression
  • Agriculture
  • Further exacerbating the situation was the
    inability of farmers to control supply. We will
    look at this problem in greater depth with a lab
    on the corn model later in the semester.
    Essentially, the problem with supply control in
    agriculture is that there are too many
    independent decision-makers in the sector. If
    demand for automobiles drops, the Big Three can
    stop producing by shutting factories down and
    laying of labor thereby curbing losses. If
    demand for food (and thus prices of commodities)
    drops, each farmer then has an individual
    incentive to produce more to cover the difference
    in price further exacerbating supply of crops
    and reducing prices.

8
The New Deal Causes of the Great Depression
  • Dustbowl
  • Phenomenon of drought and wind erosion in the
    Great Plains. Unfit cultivation practices
    combined with extended drought and heavy winds
    caused highly erodable soils to be caught up in
    the atmosphere. Described as dust blizzards
    with dust settling as far east as Boston and on
    ships in the Atlantic.
  • Thousands of people migrated from the region
    and depended on the government for help in
    restarting. The Okies characterized by John
    Steinbeck in the Grapes of Wrath were the icon
    greatly troubling American society to see
    American refugees. (Whidbey cutover farmers)

9
The New Deal Impacts of the Great Depression
  • Impacts of the Great Depression on agriculture
  • - Reverse migration Many of the more recent
    immigrants to urban areas (WWI veterans and
    industrial workers) still had close ties to
    family farms and were able to return and work on
    farms for subsistence needs.
  • - Advantage of agriculture Live at home
    campaign. The great advantage of being a farmer
    is that you can grow your own food and provide
    for much of your basic needs yourself.
  • - Foreclosures in the midst of the downward
    financial spiral, land values fell, reducing
    asset wealth in addition to reduced profits from
    market agriculture. With reduced land values,
    banks do not want to foreclose on farms (because
    it costs the banks money, too) and many rural
    banks folded and took solvent accounts with them.

10
The New Deal The Government Responds
  • Hoover
  • Hoover was an economic conservative who operated
    with a laissez faire approach to economics.
    Government involvement in expensive programs to
    stabilize agriculture were thought to be
    unnecessary and potentially problematic (ie.
    guaranteeing farmers a price that would recover
    the cost of production would be expensive and
    would encourage inefficient and increased
    production when there was already a problem of
    moving commodities).
  • The Hoover administration settled on an economic
    delay mechanism targeted at stabilizing prices
    The Federal Farm Board would purchase commodities
    on the open market when prices were low and then
    hold them and sell when prices were
    sufficiently high in an effort to create price
    equilibrium. Without supply control this works
    effectively as a subsidy creating inefficient
    and surplus production.

11
The New Deal The Government Responds
  • Hoover
  • - Promoted the idea of cooperation as the key to
    agricultural survival and recovery. Aaron Sapiro
    led cooperative efforts attempts to control
    the market usually were not successful. Farmer
    incentives never fully lined up with cooperative
    interests corporations could break cooperative
    efforts by offering a better price or quality of
    service at key times.

12
The New Deal The Government Responds
  • Other crop holding efforts
  • The Governor of Louisiana tried to garner support
    for taking a one-year holiday from cotton
    production.
  • The Governor of North Dakota attempted to create
    a wheat export embargo for ND wheat
    (unconstitutional).
  • Farmers in Iowa created the Farmers Holiday
    movement and lobbied for a farm strike on August
    15, 1932 to raise prices. Farmers attempted to
    block markets and foreclosures.
  • The Communist Party tried to unionize farmers in
    the United Farmers League.

13
The New Deal The Government Responds
  • The problem with all of these actions is
    two-fold
  • 1) without legitimate, system-wide solidarity the
    action wont work and there are simply too many
    incentives for individuals to act against the
    interest of the group (need to pay mortgages or
    lose farms) and
  • 2) there is a moral objection to using food as a
    bargaining tool especially in the midst of
    widespread poverty and starvation.

14
The New Deal FDR
  • Key New Deal personalities
  • Franklin Delano Roosevelt - President, raised on
    a farm, wide political constituency, experimenter
  • Henry Wallace Secretary of Agriculture,
    geneticist, agrarian fundamentalist
  • George Peek McNary-Haugenism approach (price
    supports and acreage reduction for commodities).

15
The New Deal FDR
  • Programs
  • - Farm Credit Administration (FCA), May 1933.
    Bought out farm mortgages from private lending
    institutions at discount, refinanced with farmers
    over longer periods at lower interest rates
  • - Land Bank, Production Credit Association, Bank
    of Cooperatives all farmer-owned enterprises
    that received capital from the FCA.
  • - Agricultural Adjustment Act, May 1933.
    Agricultural Adjustment Administration (AAA).
    Acreage-limiting legislation. Seven commodities
    corn, cotton, hogs, milk, rice, tobacco, wheat
    voluntary acreage limitation in return for a
    subsidy (price support based on parity). Barley,
    beet and cane sugar, cattle, flax, peanuts,
    potatoes, rye and sorghum added later.

16
The New Deal FDR
  • Programs
  • - Commodity Credit Corporation (CCC), October
    1933. Loans at 60-70 of parity to farmers who
    limited production to hold a crop until the
    market price moved high enough that the farmer
    could sell for a profit if the price didnt
    rise in the period of the loan, the CCC would
    seize the farmers crop in repayment for the
    loan.
  • - Soil Conservation and Domestic Allotment Act.
    Acreage limitation on the basis of erodibility
    rents paid out of general program funds this
    Act was created because Supreme Court ruled that
    the AAA of 1933 was unconstitutional regulation
    of ag production beyond the power of Congress.
  • - Agricultural Adjustment Act, 1938. Acreage
    limitations and crop loans through the CCC.

17
The New Deal FDR
  • Programs
  • Federal Emergency Relief Administration (FEMA),
    Civilian Conservation Corps, Civil Works
    Administration, Works Progress Administration
    mostly consisted of work-relief programs
    payment for labor.
  • - Resettlement Administration (1935)
    Subsistence homesteading schemes (Dust Bowl
    refugees)
  • - Farm Security Administration, 1937. Helped
    Farmers Union aquire facilitities to create
    substantial cooperatives.

18
The New Deal FDR
  • Programs
  • - Tennessee Valley Authority (TVA), 1933.
    Hydroelectric dams to provide comprehensive
    development in seven southern states land
    reclamation, fertilizer production, electricity.
  • - Rural Electrification Administration (REA), May
    1935. Long-term, low-interest financing to
    farmers to wire homes and to establish rural
    electric cooperatives.

19
The New Deal FDR
  • Programs
  • - Soil Conservation Service (SCS, now NRCS) in
    response to the Dust Bowl. Advocated new and
    different cultivation and cropping technologies
    and systems to curb erosion. Established local
    soil-conservation districts as an extension
    type of model. Example Coulee Region Farm
    Planning Project Aldo Leopold and others.
  • - USFS Shelterbelt Program. 220 million trees
    planted in the Great Plains to serve as
    windbreaks and erosion control.
  • - Taylor Grazing Act, 1934. Removed much of the
    remaining Great Plains from public domain and
    placed into Federal reserves in the BLM as
    grazing land.

20
The New Deal FDR
Programs - Most prominent project in
Washington State the Grand Coulee Dam and
complementing Columbia Basin Federal Land
Reclamation Project. Considered to be either the
largest or second largest public subsidy of
agriculture in the history of the world --- the
greatest beneficiaries are McDonalds and other
fast food chains the French Fry.
21
The New Deal Impacts, successes and failures
Impacts - New Deal programs focused primarily
on building infrastructure and institutional
support for commercial, market agriculture. -
Subsistence or welfare programs were poorly
administrated and financed and were NOT the
ultimate objectives of the New Deal. -
Questionable how much of the recovery from the
Great Depression is based upon the success of New
Deal programs and how much is based upon World
War II and other normal reasons for recovery.
22
The New Deal Impacts, successes and failures
Impacts - Unquestionably set the stage for a
marriage between government and commercial
agriculture unparalleled by any other sector in
our economy outside of the military. - New Deal
programs and initiatives were intended to be
short-term, recovery based projects. It is no
longer possible for the government to withdraw
itself from the agricultural sector without
severe, and probably, devastatingly destabilizing
consequences for our agriculture and food system.
23
World War II America goes all out for war
  • Impacts of the Great Depression on War Effort
  • National economic crisis felt at every social
    level
  • Intricate involvement of the government in every
    aspect of life the government became they
  • War boom fueled economic recovery from the
    Depression

24
World War II America goes all out for war
  • Neutral, but allied
  • Anti-Hitler / German aggression sentiment (Moral
    objective of WWII)
  • Trade and financial support for England and
    France
  • Pearl Harbor attack on US soil galvanizes
    Americans behind war objective

25
World War II America goes all out for war
  • Consumption restrictions and benefits for
    farmers
  • War Manpower Commission farm laborers exempted
    from draft
  • Petroleum and tire rations farmers get special
    allocations
  • Use of Cooperative Extension for running local
    County War Boards gave the Farm Bureau
    substantial influence over County War Boards
  • New Deal subsidy programs became politically
    invulnerable temporary suspension of acreage
    restrictions.
  • Price increases for commodities

26
World War II Factors of Production
  • 1940, 1 farmer fed 10 people. Late 80s, 1 farmer
    fed 90 people.
  • Increased structural capacity from tanks to
    tractors
  • Technology Change
  • - Improved Crop/Animal varieties, Land Grant /
    Extension researchers
  • - Mechanization
  • - Petroleum based agrochemicals
  • - Anhydrous ammonia

27
World War II Factors of Production
  • Human transitions 1940 23 of nation on
    farms. 2000 less than 2.
  • rural to urban migration
  • casualties of war
  • the baby boom
  • demographic changes increased average age of
    farmers
  • role of women changed dramatically business
    managers, off-farm employment

28
World War II The Rise of Communism
Truman Doctrine - On Dec. 31, 1946, President
Truman declared an end to the period of World War
II hostilities. Early in 1947 the British said
they could not support the Greek government after
March 31. Many diplomats feared that the Soviet
Union would then spread its power throughout the
Middle East. President Truman met the problem by
asking Congress for 400 million dollars to aid
Greece and Turkey. Congress appropriated the
money. This policy of aid, popularly known as the
Truman Doctrine, was an American challenge to
Soviet ambitions throughout the world.
29
World War II The Rise of Communism
  • Marshall Plan
  • the Marshall Plan was a rational effort by the
    United States aimed at reducing the hunger,
    homelessness, sickness, unemployment, and
    political restlessness of the 270 million people
    in sixteen nations in West Europe. Marshall Plan
    funds were not mainly directed toward feeding
    individuals or building individual houses,
    schools, or factories, but at strengthening the
    economic superstructure (particularly the
    iron-steel and power industries). "European
    Recovery Program"--aimed at
  • increasing production
  • (2) expanding European foreign trade
  • (3) facilitating European economic cooperation
    and integration
  • (4) controlling inflation, which was the
    program's chief failure.

30
World War II The Rise of Communism
  • McCarthyism
  • Theres a communist under every bush Severe
    impact on the ideological position of farmers in
    rural America
  • McCarthy sentiment STILL HAS A STRONGHOLD IN
    RURAL COMMUNITIES TODAY AND IS THE PRIMARY
    REASON THAT RURAL COMMUNTIES AND FARMERS HAVE A
    DISSONANCE TO UNIONIZING AND POLITICAL ACTION

31
Fiscal Conservatism
  • 80s Farm Crisis
  • 1971 Nixon changes fiscal policy allows dollar
    to float increased demand for US exports
  • USSR agrees to purchase US wheat, other foreign
    countries began to buy US wheat
  • 1972 1974 wheat and corn prices doubled and
    tripled respectively, acreage restrictions
    suspended
  • Massive expansion in cultivation, capital
    expenditure for land, machinery and facilities
    financed largely with high-interest credit.

32
Fiscal Conservatism
  • 80s Farm Crisis
  • Rapidly rising land prices --- rapidly
    increasing asset wealth and collateral for loans.
  • Bankers / Farmers Home Administration would
    only lend to big farmers --- or to farmers
    attempting to get big.
  • Livestock dumping concentration on grain
    production decreased diversity
  • 1979 Federal Reserve raised interest rates
    borrowing became more expensive, reduced
    inflation (relation of inflation to debt), raised
    the value of the dollar (reducing export demand
    for American grain)

33
Fiscal Conservatism
  • 80s Farm Crisis
  • 1980 Carter administration instituted grain
    embargo to USSR in protest of Afghanistan
    invasion.
  • 1981 Reagan tax cut higher interest rates
  • Rapidly declining farm prices 1979 (71 of
    parity) to 1986 (51 of parity) lower prices
    relative to the Depression
  • Financial crisis farmers were unable to
    service debts

34
Fiscal Conservatism
  • 80s Farm Crisis
  • American Agriculture Movement (AAM). Discussed
    massive agricultural strike (but no indebted
    farmer could afford not to plant lose their
    farms) staged 2 tractor protests in Washington
    D.C. 1st was marginally successful, 2nd became a
    more obstructive protest and backfired.
  • More than 300,000 farms (roughly 17 of farms)
    were lost between 1981 and 1990.
  • The 1985 Farm Bill re-introduced acreage
    limitations through Payment-in-Kind programs
    and the Conservation Reserve Program.

35
Fiscal Conservatism
  • Bayh Dole Act
  • 1980 enactment of P.L. 96-517, The Patent and
    Trademark Law Amendments Act, more commonly known
    as the Bayh-Dole Act, and amendments included in
    P.L. 98-620, enacted into law in 1984.
  • This is known as a technology transfer act
    the purpose of which is to help move research in
    the university system to the private sector for
    the development of products, processes, etc. that
    will bring benefit to the public
  • In the 1960s and 70s the federal government
    had invested substantial amounts of tax revenue
    into research that should benefit the public. The
    Federal government held over 28,000 patents in
    1980 but fewer than 5 of those patents had
    accompanying use licenses by private sector
    businesses.
  • The Federal government interpreted this as
    evidence that tax funded research in public
    institutions was not be efficiently used to
    provide public goods.

36
Fiscal Conservatism
  • Bayh Dole Act
  • The problem was believed to be a tenure problem
    (though not with real property with
    intellectual property). If a private company did
    not have the exclusive ownership of an idea it
    was expected that the company would not be
    willing to risk investing in developing products
    no guarantee of limited competition, etc.
  • The Bayh-Dole act enabled public institutions to
    share patents (or at least get exclusive
    licenses to develop products) with private
    companies. The expectation was that this would
    increase the potential of publicly funded
    research to be processed into products and goods
    for the public.

37
Fiscal Conservatism
  • Bayh Dole Act
  • The Federal government sponsors approximately
    60 of the research of public universities and
    research institutions. Private industry now
    supports between 6 -7 of public university
    research.
  • So whats the problem? In an era of decreasing
    tax revenues (tax cuts, no new taxes), this seems
    to be a new source of revenue for public research
    institutions.
  • The problem is also a tenure problem. Private
    institutions will not invest in research in
    public institutions without a substantial
    guarantee that they will recoup and profit from
    investments. The 6-7 of private revenue is
    leveraging the 60 of federal revenue (in
    addition to state and foundation revenue) toward
    private research interests rather than public
    interests.

38
Fiscal Conservatism
  • Freedom to Farm Act
  • High crop prices in 1995 and 1996, along with a
    philosophical opposition to subsidizing
    agriculture and the interest in reducing taxes
    created a fever in Congress to undo the New
    Deal based commodity support programs that had
    been in use for 60 years.
  • Congress passed a phase out package in 1996
    (known as the Freedom to Farm Act or the 1996
    Agriculture Appropriations Bill Farm Bill) that
    intended to phase out subsidies over the course
    of 7 years.

39
Fiscal Conservatism
  • Freedom to Farm Act
  • Between 1997 and 2000 depressed commodity prices
    had effectively ended the effort to phase out
    subsidies and in the first 4 years of the program
    subsidies were three times the amount that
    Congress had authorized in the Freedom to Farm
    Act.
  • The most concentrated attempt to liberate
    agriculture from government intervention was a
    miserable failure.

40
Study Questions
  • Why has the government been unable to withdraw
    itself from the agricultural sector since the
    Great Depression?
  • What are possible alternatives to intellectual
    property rights that could supplement revenues
    for public research institutions, while still
    enabling technology transfer to farmers?
  • Subsidies create inefficient markets (ie. they
    encourage overproduction and thus more subsidies)
    and are costly to the public, but are seemingly
    necessary for keeping farmers on the land. How
    can we create a subsidy program that keeps
    farmers on the land (farming sustainably) without
    being socially unacceptable and economically
    inefficient?
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