By the beginning of the 20th century the financial power of many corporations had come to rest in the money and banking centers of New York. As early as 1890 nearly three-fourths of the entire wealth of the nation was centered in urban areas and the gap between rural and urban, rich and poor was rapidly widening.
In an effort to "rationalize and stabilize" the economic life of the country, huge capital-rich corporations had formed holding companies designed to further concentrate their wealth. In combination with their markets, already coordinated by the wonders of the telephone, telegraph, transportation and other new technologies, monopolistic control of the industrial economy began to flourish.
In the depressions of the 1870s and 1890s these corporations had been successful in forcing out their weaker competitors by adopting cost-cutting technologies. By the turn of the century most key resource industries were controlled by one or two large corporations. Through price fixing and increasing production these same corporations not only could avoid costly competition, but they could concentrate on creating more demand for their goods while exploiting natural resources proportionately.
As these changes were taking place in urban areas, farmers struggled to refinance their operations to expand and to cover increasingly higher input costs. This struggle, which would come to plague rural America for an entire century, centered around the farmer's disparity within the economic system. As farm movement historian Fred Shannon explains:
"The plain fact was that agriculture was hardly paying for the effort expended on it, and the gap between poverty and plenty seemed to be widening. Low prices for crops and livestock and the high cost of purchased necessities combined with scarce money, tight credit, towering interest rates, burdensome transportation charges, and the exactions of the middlemen -- particularly the produce exchanges, grain elevator operators, and meat packers -- to make agriculture a doubtful commercial venture and hardly even a way of life.
"... The farmer's trouble was that in an erratically changing economy the supply of money lagged behind demand, his obligations deprived him of the supplementary medium of exchange that came to the aid of more favored businesses."
Agriculture, unlike most other business ventures, was by its very nature ill-equipped to handle such rollercoaster rides between prosperity and depression. Farmers could not simply lay off labor (either themselves or their family) as factories do, nor could they make sudden decisions to reduce their output when the market happened to collapse while crops were still in the ground or the livestock only half grown. Because farming depends on slow biological processes, it is much more difficult for farmers than businesses to synchronize their production schedules with abrupt swings in the economy.
Faced with low prices and high overhead, farmers have generally expanded their production, redoubled their efforts, and hoped and prayed that they would break even. In the late 1800s, however, at the same time that farm commodities were bringing in less money, prices for other goods, many of which were being fixed by the trusts and monopolies, were constantly on the rise.
In 1880, although agricultural and industrial income were both some $5 billion, farm prices were being averaged with industrial prices to obtain a general curve. Prices of manufactured goods, however, were as far above the general curve as farm goods were below, nearly doubling the presumed distance of agricultural parity.
It was out of these conditions that a variety of protest movements rapidly grew, ranging from the National Grange in the 1870s to the Populists in the 1880s.
Originally organized as farm social clubs to sustain the certain richness they saw in the texture of rural life, the Patrons of Husbandry, popularly known as the Grange, came into existence in 1867. Oliver Hudson Kelly, who conceived of the organization, once summed up its purpose.
"Its grand object is not only general improvement in husbandry, but to increase the general happiness, wealth and prosperity of the country. It is founded upon the axioms that the products of the soil comprise the basis for all wealth; that individual happiness depends upon general prosperity, and the wealth of a country depends on the general intelligence and mental culture of the producing classes."
Usually after their formal meetings they would adjourn, only to reconvene an "anti-monopoly" meeting which although shunning partisan political activity was largely devoted to discussing the railroads, the bankers' excessive interest charges and foreclosures, grain elevator operators, farm equipment companies and commodity middlemen. By 1875 some 21,697 Grange units in 33 states numbered an estimated 858,050 members and were directing most of their attention to the realization of cheap transportation and cheap money.
Unless farmers had large amounts of capital at the time and could afford to buy land near the railroads they found themselves at a distinct disadvantage when it came to shipping their crops. In addition, railroad companies often gave rebates to the large farms and large shippers to the East while charging inflated rates to farmers who shipped limited quantities of produce over short distances.
In an effort to overcome these economic hurdles the Grange began cooperative buying and selling while at the same time seeking legislation to control the abuses of the railroads. Unfortunately, their lack of business knowledge, capital and cooperative experience led to an early demise for many of their cooperative ventures. They were successful, however, in securing many needed reforms in the railroad business, including reduced fare, freight and warehouse rates. From their efforts also came the establishment of the Interstate Commerce Commission.
As the influence of the Grange diminished, the Greenback Party came to represent agrarian interests. Throughout the 1870s their candidates for local, state and federal office repeatedly declared, "the right to make and issue money is a sovereign power, to be maintained by the people of the common benefit, not for the monopolies and international syndicates which force government policies of dear money, cheap labor, and weak people."
As a fundamental transformation in rural America was taking place in the late 1800s, largely fueled by overproduction in agriculture, an accelerated exploitation of abundant natural resources and rapidly improving labor-saving technology, urban America was also changing. Cities were becoming crowded, poverty was increasingly prevalent, huge factories seeking cheap labor were multiplying, and large corporations were replacing small businesses everywhere.
It is important to recognize the connection between these rapid transformations because what was happening in urban America -- an ever-expanding cheap labor force in conjunction with high technology producing more consumer goods for concentrated capital -- was soon to become the basic principle of US farm policy. As agricultural economist, farmer and author of the remarkable 1977 book "Farming for Profit in a Hungry World: Capital and the Crisis in Agriculture," Michael Perelman explains that process from the urban worker's perspective.
"By increasing the area farmed by the average worker, labor-saving agriculture technology helped to absorb the reservoir of cheap, unused land. By increasing the amount of grain a single farmer could work, labor saving technology helped to glut the market with grain. As the price of grain fell, farmers' income suffered, making agriculture a less attractive venture. In short, labor-saving technology on the farm accomplished, to some extent, what employers had sought in vain to do by law and decree --- namely, shut off the escape route from the factory."
Next Issue: A populism born and bred in agrarian revolt.
A.V. Krebs operates the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, WA 98203-0201; email email@example.com; www.ea1.com/CARP/