8 - The dairy industry: From yeomanry to the institutionalization of multilateral governance

Summary

Dairying is one of the most regulated industries in the American economy. The main pillars of these regulations are the antitrust exemption, federal milk-marketing agreements, price supports, and import controls. Perhaps more importantly, the dairy industry is an interesting example of multilateral governance. Dairy producers organized collective-bargaining associations, such as the National Milk Producers Federation, and promotional networks in order to overcome market failures that were the result of the unequal power relationships between dairy producers and processors. In particular, the history of the National Milk Producers Federation illustrates how a trade association can acquire increased autonomy and the ability to govern an industry for over fifty years.

These multilateral forms of governance, which originated primarily in the midwest, were embedded within a specific “dairy culture,” based on solidaristic values and shared norms of existing social collectives. The promotional networks brought together diverse actors from different parts of the agricultural system, such as dairy cooperatives, agricultural scientists at the land-grant universities, members of the state extension services, and the U.S. Department of Agriculture (USDA), for the purpose of designing rules in keeping with the specific needs of the dairy producers. The common bond between the leaders and the members of cooperative associations allowed the leadership to pursue long-term strategies for the management of the industry's overproduction and pricing problems.

This particular governance regime, resting on associations and promotional networks, was sanctioned by the state, yet it avoided direct state intervention.