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American Agriculture and the Problem of Monopoly
The Political Economy of Grain Belt Farming, 1953â"1980
By Jon Lauck UNIVERSITY OF NEBRASKA PRESS
Copyright © 2000 University of Nebraska Press
All rights reserved.
ISBN: 978-0-8032-9526-1
CHAPTER 1
THE PROBLEM
Farmers identified concentrated economic wealth — the monopoly problem — as a threat to the American republic in the late nineteenth century, and the critique endured. Teddy Roosevelt busted trusts as president, and his distant cousin Franklin condemned "economic royalists" and initiated a full-scale antitrust campaign twenty years later. After World War II the deep sense of urgency about the monopoly problem persisted. John Kenneth Galbraith, for example, argued that "the dominant market of modern capitalism is not one made up of sellers offering either uniform or differentiated products. Rather it is a market of few sellers," and "all evidence" pointed to oligopoly as the "ruling market form in the modern economy." The economist Joe Bain, who authored the leading antitrust text of the postwar period, noted the "ubiquitous category of oligopolistic industries" in "our predominately oligopolistic economy." Reflecting such views, and tapping an agrarian creed dominant from the nineteenth century until at least his son' s bid for the presidency in 1984, the Reverend Theodore Mondale believed "the greatest danger confronting capitalism is the ever increasing concentration of wealth in the hands of a few. The concentration of wealth gives an undue power to a well organized group for economical and political control and for further concentration of wealth and complete control." South Dakota rancher Homer Ayres agreed with his grandfather, and with Reverend Mondale, that "it was the monopolies, or the 'money power' that was the real enemy of the common people."
A large body of theoretical literature and political thought addresses the idea of "monopoly capitalism," viewing the continuing concentration and conglomeration of economic power as an inevitable characteristic of "late capitalism." Paul Sweezy, who coauthored the book Monopoly Capital in the 1960s, believed he understood the cause of postwar American capitalism's problems: "The reason is that the process of monopolization — what Marx called the concentration and centralization of capital — is a continuing one which has characterized the history of capitalism throughout the present century and is still operating." The economist Joseph Schumpeter had already conceded in the 1940s that "Marx's vision was right."
Concentrated, uncompetitive, unworkable markets signaled "capitalism in decay," a stage when business turns to the state to revive a flagging economic system and for protection against revolution, the prelude to fascism. Noting fears that the "concentration of industrial power may lead to the police state," the head of the Antitrust Division of the Department of Justice once asked: "Can anyone doubt that the prewar experience of Germany, Japan, and Italy have proven the wisdom of the nation's concern over concentration of economic power?" Writing in the wake of German fascism and Japanese imperialism, the Chicago economist Henry Simons argued that private monopolies were dangerous because they promoted "an accumulation of government regulation which yields, in many industries, all the afflictions of socialization and none of its benefits; an enterprise economy paralyzed by political control; the moral disintegration of representative government in the endless contest of innumerable pressure groups for special favors; and dictatorship." Even before the war Harold Ickes warned Americans in an NBC radio address about a "Big Business Fascist America."
Similar fears among farmers and their champions shape the stories of postwar rural America, stories involving talk of the rural "rot belt," "rural Buchenwalds," "Appalachia in the Heartland," and hopeless "wastelands" — denoting decay, fascism, backwardness, and death — all stemming from the encroachment of monopoly capitalism, in which "agribusiness" played an important role. I propose here to analyze the nature of the monopoly problem as it affects the farmers of the American grain belt after the end of the Korean War. The area of inquiry is part of what Lincoln called "the great interior region." More specifically, it is what Frederick Jackson Turner called the Old Northwest Territory states' "trans-Mississippi sisters of the Louisiana purchase — Missouri, Iowa, Minnesota, Kansas, Nebraska, North Dakota ... South Dakota," and I include Wisconsin. This region constitutes the "grain belt," where, with a few other states, roughly 80 percent of the nation's soybeans, corn, and hogs are produced, in addition to a large portion of the nation's wheat and cattle, all commodities to which I pay particular attention. The study begins about the time the Korean War ended, but covers previous events in places. The 1953 Korean armistice ended the "longest period of sustained prosperity in American agricultural history," a period that started when the Nazis invaded France. Global crop production also reached near-record levels in 1953, coupling with the falling demand for food after the end of the war to put tremendous downward pressure on prices for the farmers' products, creating the "farm problem" that would greet President Eisenhower and his successors. The study ends around 1980, when Ronald Reagan's electoral revolution completely changed the center of gravity in American politics, signaling the "fall of the New Deal order." The early 1980s also witnessed a particularly acute agricultural depression that triggered the creation of 100 to 150 new farm organizations and transformed the landscape of farm politics, distinguishing it from the 1953 — 80 period. Moreover, the research materials for the post-1980 period are much more scarce. Even though historical records after 1980 are more sketchy and limit research in this time period, the public policy issues surrounding the monopoly problem persist to this day. Given the dramatic increase in concentration levels in agricultural processing within recent years, the monopoly problem is as prominent as ever. In April 1999 I attended a meeting of farmers and the head of the Department of Justice's Antitrust Division in South St. Paul, Minnesota. Senator Tom Harkin (D, IA) commented that it was the first time in his nearly three decades in politics that the head of the Antitrust Division had met with farmers, a measure of the continuing concern among farmers about the monopoly problem.
THE PROBLEM
In the latter half of the nineteenth century American farmers grew concerned about increasingly erratic agricultural prices and growing economic concentration in the industrial sector. After a trip to the country to meet with farmers in the late 1860s, the founder of the Grange returned to Washington and reported, "They all want some plan of work to oppose the infernal monopolies." Such sentiments inspired widespread attempts at farmer cooperative formation to stabilize prices and match industrial market power and helped secure passage of the Sherman Antitrust Act to combat industrial concentration. Into the twentieth century farmers continued their dual strategy of advocating organized, cooperative commodity marketing for themselves while promoting competition in the industrial sector in an effort to reach economic "parity" with the "industrial and commercial domination" of the corporate economy. Despite greater government intervention during the Great Depression, monopoly fears persisted as industry continued to concentrate and efforts to secure additional political relief or achieve self-organization continued to unravel. Farmer dependence on a few input producers and the threat of "agribusiness" integrating backward into agricultural production compounded the postwar problem.
The two-part problem involves the desirability and workability of competition. The first part includes the attempt of farmers to stabilize a fluctuating market economy that kept them in constant fear of losing their farms. Their efforts involved some sort of monopolistic control over the market to reduce output and raise prices, whether it be through government-granted monopolies by means of marketing quotas, state-planned production, the private organization of cooperative marketing, farmers collectively bargaining for contracts with agricultural processors, or other means of relieving the "inequality in bargaining power that exists in farm product markets." The second part of the problem involves the workability of competition in sectors of the economy closely linked to farming. Foremost in this category are food processing, meatpacking, and exporting, which have all been accused of tending toward oligopoly and monopoly, increasing the "disparity of farmer bargaining power." Also significant to this half of the problem is the potential for outright takeover of agricultural production by these sectors' attempts to integrate vertically or by the growth of nonfarm corporations involved in agriculture.
The problem originates in the nineteenth century. After the Civil War, railroads brought a greater commercialization of farming, dwarfing any previous market participation, and transformed "agriculture in the United States from the family-oriented, self-sufficient farm to commercial agriculture serving distant consumers." Further compounding the market orientation was a growing advocacy of business values in farm journals and farm newspapers, enhanced usage of scientific and technical innovations, and productivity improvements, all of which contributed to the cultivation of large tracts of new land, more than the increase for the previous 260 years.
The ascendant managerial and technocratic values that shaped farming at this time also affected the industrial sector of the American economy. These values, coupled with new technology, materials, and marketing techniques, however, also contributed to chronic price instability, "social chaos," and "destructive competition." In response, trust formation and monopolization became common. In the 1880s, for example, the railroads came to be "dominated by a relatively few huge railroad systems, each operating several thousand miles of track." Other monopolistic industries specifically affecting farming included meatpacking, barbed wire, cottonseed oil, linseed oil, sugar, whiskey, biscuits, and the cattle trust, to name a few. Organized agrarian protest in the United States started as a response to this monopoly problem and with its promotion of railroad nationalization and government regulation, and its organization of cooperative marketing to temper the market represented the first serious challenge to the orthodoxy of classical economic liberalism in the United States. Out of this heritage emerged agriculture's contemporary monopoly problem, whipsawed, as many farmers saw it, by a chronic inability to organize economically and a dependence on a widening yet concentrating industrial sector.
From the beginning of the American republic, what Joyce Appleby calls "ancillary trades," the "millers, teamsters, ship and wagon builders, bakers, coopers, and grain merchants [which] sprang up to process, transport, and sell American grains," were a concern to farmers. Historians have typically echoed farmers' concerns and talk of "institutional leviathans — the corporations and trusts — with centralized control over the economic lives of farmers" and "corporate monopoly" setting prices by "administrative edict." The classic comparison describes farmers marketing in an extremely competitive and disorganized market, one economists hold up as the example of "perfect competition," while buying in concentrated markets and selling in oligopsonistic markets. Whereas farm prices dropped 63 percent and production only 6 percent from 1929 to 1933, for example, the price of farm implements fell only 6 percent while production dropped 80 percent. Contemporaries believed these price statistics proved that the "'modern industrial organization' had 'destroyed the free market' and lodged the making of industrial policy in the hands of a few private individuals."
Corporate mergers and acquisitions after World War II fueled these long-standing fears of industrial concentration and prompted continued talk of substituting "public regulation [for] the corporate giants' private planning" or of divesting large firms like General Motors and U.S. Steel. For farmers the specific concern was the food-processing industry, a key component of "agribusiness," the postwar term describing the "sum total of all operations involved in the production and distribution of food." Already described as tending toward "monopoly and oligopoly" in the 1930s, fifteen years of mergers between 1950 and 1965, according to some government reports, left 80 percent of value-added food products in oligopolistic industries. Many believed that under these conditions farmers would never get a fair price and that most of the profits from food would be enjoyed by the processing industry. Similar logic was applied to the aspect of agribusiness handling grain exports. Although the industry involved thirty-some firms in the 1920s, six companies exported 96 percent of wheat, 95 percent of corn, 90 percent of oats, and 80 percent of sorghum in the 1970s. The massive postwar rural to urban migration — the largest "the world has ever known" according to President Kennedy's secretary of agriculture — also coincided with a growth in corporate farms from 1960 to 1968 that matched the total for all previous time periods, causing one U.S. senator to predict rural America's "headlong descent into a state of corporate feudalism."
The opposition to corporate farming and monopoly was part of a much broader dilemma. As Ellis Hawley has argued, the problem involved larger "questions of power ... the development, in particular, of private concentrations of economic power and ... the implications of this development for a democratic society." For some, the postwar plight of the American farmer epitomized this problem; the classic exemplar of American republicanism, the yeoman farmer, faced concentrated, collusive, and uncompetitive markets and corporate buy-out efforts. The struggle against the various manifestations of the monopoly problem, so it was argued, became the last hope of preserving any semblance of a competitive economy or the nation's democratic principles. The end of the independent farmer also meant the deterioration of agriculturally dependent rural areas and small towns — the "backbone of America," where the "American tradition of democracy was formed" — while those displaced were forced to "rot on the welfare rolls in urban slums." As David Lynch noted about the Great Depression, "landless men, great armies of 'Joads,' constitute a festering sore on the social and political body and contribute a poor foundation to a political democracy." Those "tractored out" in the postwar period were no different and no less detrimental to democracy. Their plight prompted dark humor of rodeo as a "refugee camp for cowboy wannabees dislocated when farming and ranching became agribusiness" and more sober descriptions of "technoserfdom" and the "rise of America's rural ghetto."
Compounding the damage to agrarian democracy and small-town values, opponents of corporate farming argued, were the dangers and disproportionality of large-scale industrial production techniques. The logic resonated, given the heightened environmental awareness of the postwar period and the long-standing "dominant image of an undefiled, green republic, a quiet land of forests, villages, and farms dedicated to the pursuit of happiness." Consider a literary treatment:
And then one day we were running southwest from Dodge City after a very bad morning in west Kansas, a morning starting in Scott City and soon lost in the depressing agribusiness haze and swamp, in the humiliating funk of that rampant out-of-proportion agriculture and its miles of chemical-soaked fields and giant rococo machinery, its outrageous absentee-landlord devastation of the Arkansas River bottom east from Pierceville, wheat jammed in to the very banks, leaving not a single tree for 20 miles along one the continent's major rivers. It is a fouled mess and monotone, an ignoble extreme of slash and burn.
(Continues...)
Excerpted from American Agriculture and the Problem of Monopoly by Jon Lauck. Copyright © 2000 University of Nebraska Press. Excerpted by permission of UNIVERSITY OF NEBRASKA PRESS.
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