McNary-Haughenism

When I was in grad school at NYU, back in the salad days of the Carter administration, I took a class in the New Deal with the late Albert Romasco, a gentleman and a scholar if there ever was one, and I know Rob agrees. (For those looking for a refresher on New Deal economic policy, I strongly recommend his two books, the Poverty of Abundance and the Politics of Recovery. His was a voice stilled far too soon.) Anyway, I guess because I knew nothing about it, I became fascinated by federal farm policy in the 1920s and 1930s, and part of the fascination was that farm policy was really in the center of policy debates, in a way it hadn’t (or hasn’t) been in my lifetime. So I ended up writing a paper for Al on McNary-Haugenism, probably because I liked the sound of its name. It remains one of the least remembered “isms” in American history, but if you were around in the 1920s, and cared about politics you definitely would have heard of it. Sponsored by Charles McNary of Oregon (who was, as you remember, Wendell Wilkie’s running mate in 1940, the Sarah Palin of his day), and Gilbert Haugen of Iowa, it was a policy that would have required the federal government to purchase any agricultural surplus from farmers, and then sell it overseas, below the market price in the United States, a practice which has been subsequently given the inelegant label of “dumping” The McNary-Haugen Bill twice passed congress, only to be vetoed by both Coolidge and Hoover, which only made the prairie fire of McNary-Haugenism burn all the more brightly.

McNary-Haugenism was a response to an endemic problem that faced farmers at that time, that of declining price levels for their produce. For farmers, the depression started in 1920, not in 1929, and the low farm prices in the 1920s was simply a replay of a problems farmers had faced many times before. In 1889, in the midst of a long decline in farm prices, the US Department of Agriculture was created, the first government department that had as its main purpose the bolstering of asset prices. Henry Wallace, the Secretary of Agriculture in FDR’s first two terms (and who defeated McNary for the vice presidency in 1940), appreciated the sentiment behind McNary-Haughenism but thought it was ultimately self-defeating. First, no country was going to want to undercut its own domestic food production by letting American produce sell cheaply, and second, the basic problem with McNary-Haughenism was that it failed to limit agricultural production. Without some agreement, and some federal assistance to limit production, the underlying problem would remain. And during his eight years as Secretary of Agriculture, that is just what Wallace did, introduce and implement all sorts of programs that encouraged and paid farmers to limit production and not to farm.

Okay , you say, this is all very interesting, but why are you telling me this? For the most part, Americans want to keep government out of their business when asset prices are rising, but come calling to the government when asset prices are falling. We are suffering through a huge collapse in asset prices, particularly in housing. And all sorts of people; realtors, bankers, and homeowners, have been flocking to government, looking for help. And I am very afraid that what Obama proposed today in terms of helping on mortgage foreclosures is a form of McNary-Haughenism, in that it involves the government with bolstering asset prices, but fails to address the underlying problem; there are too many homes and too many homeowners. Without making the United States less of an ownership society, and more a place to live without having to assume ridiculous levels of indebtedness society, the basic problem will remain unaddressed.

Farm policy has never again been as important, or at least as politically volatile, as it was during the New Deal. (And never again has there been a politician like Henry Wallace, who came to national prominence because of the farm issue. ) And one reason for this is that one result, not entirely intended, of Wallace’s farm policy is that we greatly reduced the number of farmers. Whether this was a good thing can be debated, but at least it got the marginal farmers off the land. And at the same time we reduced the number of farmers, we started to increase the number of home owners, often by farmers selling their potato fields to real estate developers. And we continually added to the universe of home owners until they became increasingly marginal. But it is no more important that everyone own their own house than it is than everyone grow their own food. And housing has become the farm crisis of the early 21st century, a crucial commodity with a perpetually unstable asset price, that government will try, with greater or less success, to control its swings. I think what is really needed is less government price support for housing prices, which like agricultural price supports will last forever, but alternatives to private homes and mortgages, in the form of decent, affordable moderate income housing, into which we could move millions of people. When the government merely assumes responsibility for maintaining asset prices without trying to control the underlying speculative nature of the commodity in question, we have returned, as Al Romasco would say, to the siren song of McNary-Haughenism.