1. The Role of Government in U.S.
Agriculture
Travis Crisp &
Jordan Smith

2. Introduction
 Thischapter examines the roots of
current farm programs, growth in farm
programs over time, and possible
explanations for the growth of
government in the United States.

3. Government Roots in AG
 The United States Department of Agriculture is a
United States Federal Executive Department . Its
purpose is to develop and execute policy on farming,
agriculture, and food. It aims to meet the needs of
farmers and ranchers, promote agricultural trade and
production, work to assure food safety, protect
natural resources, foster rural communities and end
hunger, in America and abroad.

4. Roots of Current Farm Programs
 Governmental efforts were made to intervene
extensively in agriculture for most of the twentieth
century. Many aspects aspects of current farm
programs are firmly rooted in legislation enacted
during the Great Depression or the New Deal era,
the basic approach can be traced to earlier years.

5. Co-op’s
 The Capper-Volstead Act of 1922, developed modern day
cooperatives.
 This act gave producers the legal right to work together in
jointly marketing their products.
 Other business firms were legally prohibited from such
collusive activity by antitrust laws.
 What would the Agricultural market be like today without
cooperatives?

6. Federal Farm Board
 Created 1929 by President Herbert Hover, who foresaw the
farm problem as temporary overproduction and low prices.
 The basic idea was to raise prices of wheat, cotton, and other
“surplus” products through government purchases and storage.
 The board attempted to support farm prices through a
government-sponsored grain-storage program, no shortfalls
occurred, and the board’s budget soon was exhausted.
 The program failed and President Roosevelt eliminated the
Federal Farm Board in 1933.

7. The Agricultural Adjustment Act
(AAA)
 The Agricultural Adjustment Act (AAA) of 1933
established the goals of “parity” prices and incomes
in agriculture to raise product prices above the free-
market level.
 The 1933 AAA signaled a huge increase in
government involvement in agriculture in the United
States, during the depths of the Great Depression.

8. Prosperity to Poverty
 1910 to 1920 was a period of relative prosperity for U.S
agriculture. The war in Europe during the second half of the
decade, increased the demand for U.S. products.
 1920 and 1921, U.S. farm prices plummeted as European
production recovered more quickly than expected. Corn prices
fell from $1.85 to $0.41 per bushel; wheat prices fell from $2.58
to $0.92 per bushel; hog prices fell from $0.19 to $0.065 per
pound.
 Then came the Great Depression, which held the economy in
economic chaos from 1929 to 1939.

9. Causes of the Great Depression
 Government intervention in the form of high tariffs, restricted monetary
policies, and policies to maintain wages and prices either caused or
greatly worsened the economic chaos at that time.
 The Smoot-Hawley Tariff Act of 1930, raised import tariffs to the
highest levels in the twentieth century. Restrictions on imports by the
United States led to retaliations by foreign trading partners. U.S. farm
products, dropped immensely following the passage of the tariff bill.
 In summery, the government policies during the Great Depression
probably could not have been better designed had policymakers
wanted to bring about economic stagnation or to prevent economic
recovery.

10. New Deal Measures in Agriculture
 A broad range of New Deal programs was instituted to deal
with the farm problem.
 Production controls and price supports
 Subsidized food distribution
 Export subsidies
 Subsidized farm credit
 Conservation of land and water resources
 Crop insurances and disaster payments
 Expanded agricultural research and extension services
Programs in all these area are still in effect, although many
changes have been made since the program began.

11. Growth of Government Farm Programs
Why did aggregate federal
expenditures as a share of GDP
increase from 2.5 % in 1929 to
around 22 % in 1995 ?
Economist say there are four
underlying factors

12. ONE: Modern Industrial Economy
 The modern industrial economy has an
expanding government sector to deal with
the following
 Public health: food supply, food safety, and
market.
 Environment: to protect and conserve the
land and natural recourses.

13. Two: Public Goods
 This is yet one more justification of the
growth of government.
 Economist argue that that government
coercion is required to over the come free-
rider problem.
 (free-riders)-are actors who consume more
than their fair share of a resource, or
shoulder less than a fair share of the costs of
its production.

14. Third: Change in Ideology
 Over time the publics perception of the
appropriate role of government.
 Before the new deal era it was thought that
the role of government should be a limited
one.
 Up to the new deal the governments role was
a protective one only.

15. Fourth: Emergency or economic crisis
 In the past there has only been two forms of
crisis War and Business depression.
 The new deal was the best example of this
expansion of government.
 Many of the new deal legislation act were
attached with emergency to give the state
and local government the power to act
accordingly.

16. Summary
 Most government programs in agriculture today have roots in pre-1933 farm
programs and proposals such as the Capper-Volstead Act, and the Federal
Farm Board, almost all current farm programs have a direct link to the New
Deal era.
 The conventional wisdom has been that the Great Depression resulted from a
failure of the market process and that massive government intervention was
necessary to stabilize agriculture and the rest of the economy.
Evidence, however, demonstrates that government policies of high tariffs,
high taxes and monetary mismanagement and prices either caused or greatly
exacerbated the chaotic economic conditions of that era.
 Consumer groups and the general public recognize that income redistribution is
a major force behind U.S. farm programs. A change in public opinion as to the
appropriate role of the state, may also be important in the growth of government
in agriculture.

17. Talk Time with Travis &Jordan
Question: Should the government intervene in agriculture and
other areas to regulate and stabilize the economy?