Agricultural Adjustment Act
The law, in its entirety, can be read here.
When President Franklin Delano Roosevelt took office in March 1933, the United States was in the midst of the Great Depression. "Farmers faced the most severe economic situation and lowest agricultural prices since the 1890s." "Overproduction and a shrinking international market had driven down agricultural prices." Soon after his inauguration, Roosevelt called the Hundred Days Congress into session to address the crumbling economy. From this Congress came the Agricultural Adjustment Administration to replace the Federal Farm Board. The Roosevelt Administration was tasked with decreasing agricultural surpluses. Wheat, cotton, field corn, hogs, rice, tobacco, and milk and its products were designated as basic commodities in the original legislation. Subsequent amendments in 1934 and 1935 expanded the list of basic commodities to include rye, flax, barley, grain sorghum, cattle, peanuts, sugar beets, sugar cane, and potatoes. The Administration targeted these commodities for the following reasons:
- Changes in the prices of these commodities had a strong effect on the prices of other important commodities.
- These commodities were already running a surplus at the time.
- These items each required some amount of processing before they could be consumed by humans.
Goal and Implementation
"The goal of the Agricultural Adjustment Act, restoring farm purchasing power of agricultural commodities or the fair exchange value of a commodity based upon price relative to the prewar 1909-14 level, was to be accomplished through a number of methods. These included the authorization by the Secretary of Agriculture (1) to secure voluntary reduction of the acreage in basic crops through agreements with producers and use of direct payments for participation in acreage control programs; (2) to regulate marketing through voluntary agreements with processors, associations or producers, and other handlers of agricultural commodities or products; (3) to license processors, associations, and others handling agricultural commodities to eliminate unfair practices or charges; (4) to determine the necessity for and the rate of processing taxes; and (5) to use the proceeds of taxes and appropriate funds for the cost of adjustment operations, for the expansion of markets, and for the removal of agricultural surpluses."
"Congress declared its intent, at the same time, to protect the consumers interest. This was to be done by readjusting farm production at a level that would not increase the percentage of consumers' retail expenditures above the percentage returned to the farmer in the prewar base period."
The juxtaposition of huge agricultural surpluses and the many deaths due to insufficient food shocked many, as well as some of the administrative decisions that happened under the Agricultural Adjustment Act. For example, in an effort to reduce agricultural surpluses, the government paid farmers and ranchers hundreds of millions of dollars to destroy crops and livestock. Oranges were being soaked with kerosene to prevent their consumption and corn was being burned as fuel because it was so cheap. There were many people, however, as well as livestock in different places starving to death. Farmers slaughtered livestock because feed prices were rising, and they couldn’t afford to feed their own animals. Under the Agricultural Adjustment Act, “plowing under” of pigs was also common to prevent them reaching a reproductive age, as well as donating pigs to the Red Cross.
In 1935, the income generated by farms was 50 percent higher than it was in 1932, which was partly due to farm programs such as the AAA.
Tenant farming characterized the cotton and tobacco production in the post-Civil War South. As the agricultural economy plummeted in the early 1930s, all farmers were badly hurt but the tenant farmers and sharecroppers experienced the worst of it.
To accomplish its goal of parity (raising crop prices to where they were in the golden years of 1909–1914), the Act reduced crop production. The Act accomplished this by offering landowners acreage reduction contracts, by which they agreed not to grow cotton on a portion of their land. By law, they were required to pay the tenant farmers and sharecroppers on their land a portion of the money; but after Southern Democrats in Congress complained, the Secretary of Agriculture surrendered and reinterpreted section 7 to no longer send checks to sharecroppers directly, hurting the tenants. The farm wage workers who worked directly for the landowner suffered the greatest unemployment as a result of the Act. There are few people gullible enough to believe that the acreage devoted to cotton can be reduced one-third without an accompanying decrease in the laborers engaged in its production. Researchers concluded that the statistics after the Act took effect "... indicate a consistent and widespread tendency for cotton croppers and, to a considerable extent, tenants to decrease in numbers between 1930 and 1935. The decreases among Negroes were consistently greater than those among whites." Another consequence was that the historic high levels of mobility from year to year declined sharply, as tenants and croppers tended to stay longer with the same landowner.
For most tenants and sharecroppers the AAA was a major help. Frey and Smith concluded, "To the extent that the AAA control-program has been responsible for the increased price [of cotton], we conclude that it has increased the amount of goods and services consumed by the cotton tenants and croppers area." Furthermore the landowners typically let the tenants and croppers use the land taken out of cotton production for their own personal use in growing food and feed crops, which further increased their standard of living. Another consequence was that the historic high levels of turnover from year to year declined sharply, as tenants and croppers tend to stay with the same landowner. Researchers concluded, "As a rule, planters seem to prefer Negroes to whites as tenants and croppers."
Delta and Providence Cooperative Farms in Mississippi and the Southern Tenant Farmers Union were organized in the 1930s principally as a response to the hardships imposed on sharecroppers and tenant farmers.
Although the Act stimulated American agriculture, it was not without its faults. For example, it disproportionately benefited large farmers and food processors, with lesser benefits to small farmers and sharecroppers. With the spread of cotton-picking machinery after 1945, there was an exodus of small farmers and croppers to the city.
Attached as Title III to the Act, the Thomas Amendment became the 'third horse' in the New Deal's farm relief bill. Drafted by Senator Elmer Thomas of Oklahoma, the amendment blended populist easy-money views with the theories of the New Economics. Thomas wanted a stabilized "honest dollar," one that would be fair to debtor and creditor alike.
The Amendment said that whenever the President desired currency expansion, he must first authorize the Federal Open Market Committee of the Federal Reserve to purchase up to $3 billion of federal obligations. Should open market operations prove insufficient, the President had several options. He could have the U.S. Treasury issue up to $3 billion in greenbacks, reduce the gold content of the dollar by as much as 50 percent, or accept 100 million dollars in silver at a price not to exceed fifty cents per ounce in payment of World War I debts owed by European nations.
The Thomas Amendment was used sparingly. The treasury received limited amounts of silver in payment for war debts from World War I. On 21 December 1933, Roosevelt ratified the London Agreement on Silver (adopted at the World Economic and Monetary Conference in London on 20 July 1933). At the same time, Roosevelt issued Proclamation 2067, ordering the United States mints to buy the entire domestic production of newly mined silver at 64.5¢ per ounce. "Roosevelt’s most dramatic use of the Thomas amendment" came on 31 January 1934, when he decreased the gold content of the dollar to 15 5/21 grains (0.98741 grams) .900 fine gold, or 59.06 per cent of the previous fixed content (25 8/10 grains, or 1.6718 grams). "However, wholesale prices still continued to climb. Possibly the most significant expansion brought on by the Thomas Amendment may have been the growth of governmental power over monetary policy.
The impact of this amendment was to reduce the amount of silver that was being held by private citizens (presumably as a hedge against inflation or collapse of the financial system) and increase the amount of circulating currency.
On January 6, 1936, the Supreme Court decided in United States v. Butler that the act was unconstitutional for levying this tax on the processors only to have it paid back to the farmers. Regulation of agriculture was deemed a state power. As such, the federal government could not force states to adopt the Agricultural Adjustment Act due to lack of jurisdiction. However, the Agricultural Adjustment Act of 1938 remedied these technical issues and the farm program continued.
- Agricultural Adjustment Act Amendment of 1935
- Agricultural Adjustment Act of 1938
- New Deal
- Franklin D. Roosevelt
- Commodity Credit Corporation
- Hurt, R. Douglas, Problems of Plenty: The American Farmer in the Twentieth Century, (Chicago: Ivan R. Dee, 2002), 67.
- Hurt, R. Douglas, Problems of Plenty: The American Farmer in the Twentieth Century, (Chicago: Ivan R. Dee, 2002), 68.
- Rasmussen, Wayne D., Gladys L. Baker, and James p. Ward, "A Short History of Agricultural Adjustment, 1933-75." Economic Research Service, United States Department of Agriculture, Agriculture Information Bulletin No. 391 (March 1976), pg. 2.
- Hurt, R. Douglas, Problems of Plenty: The American Farmer in the Twentieth Century, (Chicago: Ivan R. Dee, 2002), 69.
- Rasmussen, Wayne D., Gladys L. Baker, and James S. Ward, "A Short History of Agricultural Adjustment, 1933-75." Economic Research Service, United States Department of Agriculture, Agriculture Information Bulletin No. 391 (March 1976), pg. 2.
- Poppendieck, Janet. Breadlines Knee-deep in Wheat: Food Assistance in the Great Depression. New Brunswick, NJ: Rutgers UP, 1986. Print.
- Powell, Jim (2003). FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. New York: Crown Forum. p. 134. ISBN 978-0761501657.
- Fleetwood, Jonathan (May 1993). "The Hog Reduction Program of the AAA". Illinois History. Retrieved 5 December 2014.
- Rasmussen, Wayne D., Gladys L. Baker, and James S. Ward, "A Short History of Agricultural Adjustment, 1933-75." Economic Research Service, United States Department of Agriculture, Agriculture Information Bulletin No. 391 (March 1976), pg. 4.
- Badger, Anthony J (January 1, 1989). The New Deal. The Depression Years, 1933–1940. Chicago: Ivan R. Dee. pp. 147–89. ASIN B00B8TO1SY.
- Folsom, Jr., Burton (2008). New Deal or Raw Deal?. Simon and Schuster. p. 62.
- "Galbraith and the Southern Sharecroppers". David Henderson. Retrieved August 21, 2013.
- Fred C. Frey and T. Lynn Smith, "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," Rural Sociology (1936) 1#4 pp. 483–505 at p 489 online
- Fred C. Frey and T. Lynn Smith, "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," Rural Sociology (1936) 1#4 pp. 483–505 at pp. 501–3 online
- Smith, Fred C. (2004). "Cooperative Farming in Mississippi." Mississippi Historical Society.
- Hamilton, David. Agricultural Adjustment Act: An entry from Macmillan Reference USA's Encyclopedia of the Great Depression. s.v. "Sharecroppers" 1. Macmillan Reference USA.
- David Webb, "The Thomas Amendment: A Rural Oklahoma Response to the Great Depression," in Rural Oklahoma, ed. Donald E. Green (Oklahoma City: Oklahoma Historical Society, 1977).
- The American Presidency Project. "Proclamation and Statement Ratifying the London Agreement on Silver, December 21, 1933". Retrieved 2015-01-10.
- The American Presidency Project. "Proclamation 2067 - Ratifying the London Agreement on Silver, December 21, 1933". Retrieved 2015-01-10.
- The American Presidency Project. "White House Statement on Proclamation 2072, January 31, 1934". Retrieved 2015-01-10.
- The American Presidency Project. "Proclamation 2072 - Fixing the Weight of the Gold Dollar, January 31, 1934". Retrieved 2015-01-10.
- Frey, Fred C. and Smith, t. Lynn "The Influence of the AAA Cotton Program Upon the Tenant, Cropper, and Laborer," Rural Sociology (1936) 1#4 pp. 483–505 online
- Sumner, Daniel (2008). "Agricultural Subsidy Programs". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.
- Encyclopedia of Oklahoma History and Culture – Agricultural Adjustment Act
- Public Law 73-10, 73d Congress, H.R. 3835, Agricultural Adjustment Act of 1933
- A Message from FDR to Congress on the AAA