5 - Rethinking the structuralist agenda (II): The fate of the Agricultural Adjustment Administration 1934–36

Summary

When the Agricultural Adjustment Administration was created in May 1933, precisely what this novelty would amount to was not clear. The act conveyed to the Secretary of Agriculture extraordinary powers to raise farm prices. Counsels were divided, however, about the ways they should be exercised. Measures to raise demand (particularly through export promotion) had a formidable political constituency, particularly because their advocates preferred not to tamper with a farmer's decision about what and how much to produce. Techniques to restrict supply enjoyed no comparable popularity among the farm lobbies, though a substantial number of economists concerned with the plight of agriculture held them to be crucial to relief of farm distress. There were, however, two versions of supply management. One insisted that direct controls, via the domestic allotment method for shrinking outputs, were essential, at least in the short term. The other assigned priority to output shrinkage through governmental programs to retire acreages ill suited to tillage.

By the end of 1933, earlier uncertainties about which of the various strategies would take precedence were largely removed. The major in-house voice for market expansion (and ideally without production constraints), George N. Peek, had been replaced as Agricultural Adjustment Administrator by Chester Davis, who was more sympathetic to output controls. At the same time, the ways in which government intervened to reduce supply had given rise to complications that the planners had not anticipated. Nor should this have been a matter of surprise.