Farm Crisis

A farm crisis is an economic event that affects farms and may be caused by various factors. There have been a number of farm crises in U.S. and world history. In fact, the observed relationship between droughts and economic calamities was one early explanation for the business cycle in the then-young science of economics, as various economists struggled to find predictable periodic phenomena such as weather patterns or sunspots that could be incorporated into models demonstrating an orderly system of agricultural and economic fluctuations. No such model was ever successfully constructed—there are too many interlocking factors, and although a low crop yield one year can affect sectors of the economy beyond the agricultural sector, a new tax law the following year can affect farmers’ ability to bring crop to market, without needing the involvement of sunspots or any such external phenomena.

Though there have been economic calamities affecting farmers in all eras of U.S. history, and a growing divide between farmers and bankers in the 19th century that echoed the agrarian/industrialist, Republican/Federalist, Jefferson/Hamilton divide of the nation's infancy, the first such crisis to be called a farm crisis was that faced by farmers in the 1920s. Tellingly, it was as of the 1920 census that the United States officially became an urban nation, with more Americans living in cities than in rural areas. A generation earlier, the Census Bureau had declared an end of the frontier, since there was no area of the United States left unpopulated, outside of a few nature reserves or uninhabitable patches of desert. Farmers in 1920 represented 27 percent of the workforce; this would decline further to 21 percent in 1930. The world suffered from a global recession in the immediate aftermath of World War I, and although much of the United States recovered quickly and enjoyed the prosperity of what is remembered as the Roaring Twenties, U.S. farmers were barely able to hang on. It would be sorely tempting to blame Prohibition and the resulting decreased demand for grain—the corn, wheat, and rye used to make American whiskeys, the barley used for beer—but the abundant surpluses of crops affected far more than just grains, and the crisis began in 1919, before Prohibition went into effect.

Crop prices around the world fell in response to increases in supply and decreases in demand, and even as these surpluses became more and more problematic, improvements to farm technology made farms more and more efficient and more and more productive. In part, this was simply the result of the ongoing technological revolution, particularly as mechanical equipment became cheaper to manufacture and vehicles of all kinds became cheaper and better, which not only improved farm equipment like tractors but also improved and made cheaper the modes of transportation used to bring crops and livestock to market. In part it was the result of farmers attempting to make their operations more [Page 165]efficient—aiming for their crops cost them less per bushel, since they were selling for less per bushel—but this efficiency made farms even more productive and only worsened the surpluses, keeping prices down. When the stock market crash of 1929 brought about the Great Depression, farmers were already suffering, and only when the rest of the country joined them in that misery were serious remedies discussed. Much of President Franklin D. Roosevelt's New Deal legislation concerned U.S. farms, addressing issues that had been problematic for years before the Depression began and that had already driven many farmers out of business. The federal school lunch program, food stamp plan, and Rural Electrification Act improved rural communities and the lives of the working poor; other programs targeted farm-specific problems. The first two Farm Bills were passed and instituted agricultural subsidies, which protected farmers from the reduced prices caused by surpluses—an institution still in place three-quarters of a century later. Farmers recovered, alongside their fellow Americans, in the 1940s, when the combination of the New Deal reforms and the industrial buildup of World War II rejuvenated the U.S. economy.

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