Friday, September 4, 2009

The case of US agricultural policy -- socialism?

From the 1930s to 1996, supply management was the core of U.S. agricultural policy. Supply management rested on three principal programs: price supports, production controls, and export subsidies. Price supports were essentially guaranteed minimum prices that farmers would receive for certain commodities – including cotton, wheat, and corn. To receive price supports, farmers had to adhere to production controls, which limited the acreage that could be devoted to growing these crops. Export subsidies helped to reduce the costs of US agricultural goods to make them more competitive in the world economy.

Through supply management policy, then, the federal government set prices, closely regulated production, and was deeply involved in trade. This was a tremendous about of government intervention in the market economy. More than seen previously in agriculture, and more than seen in almost any other sector of the economy. Supply management policy severely restricted the “normal operation” of the market economy - for more than 60 years.

This policy was meant to (1) raise prices for farm commodities and (2) prevent the overproduction that plagued agriculture (especially cotton and wheat) in the 1920s and 1930s. All of this was also intended to raise farmers’ incomes.

How did the policy exist in the U.S. for the duration of the Cold War, when socialism and communism were vehemently eschewed in every corner of society? Why did the US engage in such extensive regulation of the market at a time when it was the leader of laissez faire economics?

Was supply management policy an example of the federal government imposing its socialist will on American farmers and consumers? Was this policy an example of anti-market (i.e., socialist) groups winning a national policy?

The answer to these questions will come soon. (Or, you can just read my book…)