During World War I, American farmers enjoyed the rare luxury of high prices; the European belligerents were unable to feed their populations and U.S. production was expanded to meet the need.
A rapid reversal of fortunes occurred after the war, however, when agricultural pursuits were resumed in Europe and massive new sources of supply developed, in particular the production of grains in Australia, Argentina, Canada and Russia. Prices plummeted in the U.S. in the 1920s and farmers were left holding huge surpluses; many resorted to borrowing, or mortgaging their farms in order to remain in business.
The farmers’ plight was especially hard to take when so many other segments of the American economy were prospering in the Roaring Twenties. American agriculture was unable to follow an isolationist path as was the case in diplomacy and manufacturing. Farmers who produced in excess of domestic consumption tried to sell their excess on world markets where they were at the mercy of global competition. American producers lacked the will and cohesion to restrict their output in order to drive prices up.
Experts in the United States began to advance the idea that some form of regulation of agricultural exports was needed. George Peek, president of the Moline Plow Company, was one of these. Reasoning that prosperous farmers would buy more plows, Peck proposed a two-tiered pricing system:
In early 1924, this concept was introduced in Congress by Senator Charles L. McNary of Oregon and Representative Gilbert N. Haugen of Iowa. Their bill, which was repeatedly introduced over the next four years, called for the following:
The American market price charged to domestic customers would remain high because of protection afforded by high tariffs.
- The world market price would be based on global supply and demand, and most likely would be lower than the domestic price.
The McNary-Haugen proposal was backed by Coolidge’s secretary of agriculture, Henry C. Wallace, and by advocates of corn and wheat producers, but the measure failed to attract support from Southern Congressmen and died in June 1924. A second effort was made in May 1926, but met the same fate.
A federal farm board was to be created to purchase surplus farm production at pre-World War I prices; the surpluses were to be stored until domestic conditions improved or until a decision was made to offer them on world markets.
- If the farm board incurred a loss in marketing the surpluses, then “equalization fees" were to be charged back to the farmers.
The McNary-Haugen bill was re-crafted in early 1927, this time extending assistance to cotton and tobacco farmers. As planned, Southern legislative support developed and the bill was passed by both houses of Congress. President Coolidge, however, pointed to looming evils of price-fixing and a swelling bureaucracy, and vetoed the measure.
The election year of 1928 saw yet another effort on behalf of the farm plan. McNary-Haugen passed in the House and Senate be wider margins than previously, but still lacked the numbers to override the predictable veto by the president. Coolidge reiterated his objections in his 1928 veto message:
We should avoid the error of seeking in laws the cause of the ills of agriculture. This mistake leads away from a permanent solution, and serves only to make political issues out of fundamental economic problems that cannot be solved by political action.... I have believed at all times that the only sound basis for further Federal Government action in behalf of agriculture would be to encourage its adequate organization to assist in building up marketing agencies and facilities in the control of the farmers themselves. I want to see them undertake, under their own management, the marketing of their products under such conditions as will enable them to bring about greater stability in prices and less waste in marketing, but entirely within unalterable economic laws. Such a program, supported by a strong protective tariff on farm products, is the best method of effecting a permanent cure of existing agricultural ills. Such a program is in accordance with the American tradition and the American ideal of reliance on and maintenance of private initiative and individual responsibility, and the duty of the Government is discharged when it has provided conditions under which the individual can achieve success.
The essential problem with this legislative proposal was that it lacked support in non-farm areas of the country. Some feared that if the law were enacted and controls imposed on channeling farm goods into the economy, then higher prices would result — an end desired by the farmer, but not consumers. Other critics felt that there were no incentives for farmers to regulate their output and that they would actually be rewarded for overproduction, a clearly unacceptabe result in an era dedicated to efficiency.
Farm issues would play prominently in the campaign in the fall of 1928.
See other domestic activities during the Coolidge administration.