American Agriculture in the Twentieth Century: How It Flourished and What It Cost

Published by EH.NET (June 2003)

Bruce L. Gardner, American Agriculture in the Twentieth Century: How It Flourished and What It Cost. Cambridge, MA: Harvard University Press, 2002. x + 388 pp. $49.95 (cloth), ISBN: 0-674-00748-4.

Reviewed for EH.NET by Julian M. Alston, Department of Agricultural and Resource Economics, University of California, Davis.

At the turn of the twentieth century most Americans were farmers or came from farm families, and almost half of the U.S. population still lived on farms. The number of farms was almost six million, and still growing, and the amount of land in agriculture was still growing too, mainly through expansion in the west. The expansion of agricultural land and farm numbers continued well into the 1900s, but by mid-century both trends had been reversed. The 1930s saw the beginnings of large progressive changes in the farm economy; and by 2000, the picture was very different from one hundred years earlier. The total number of farms had shrunk to fewer than two million, only a very small share — less than two percent — of the total population lived on farms or worked in agriculture, and agriculture contributed a much smaller share to the total economy than in 1900. Yet with only one-third as much total labor as in 1900, at the end of the twentieth century U.S. agriculture was producing seven times as much output, and average farm family incomes had risen to equal or surpass non-farm family incomes.

These and other dramatic changes in the nature and structure of U.S. agriculture and its role in the economy represent an important element of the nation’s economic development. Much has been written about the causes and consequences of the transformation of American agriculture in the twentieth century, but mostly the literature relates to particular elements of the history — particular sub-periods, regions, industries, or issues. A coherent, complete, comprehensive, quantitative assessment has been lacking. Among economists, Bruce Gardner (Professor and Chair of the Department of Agricultural and Resource Economics, University of Maryland.) is a natural choice to address this deficiency. He is the leading agricultural economist of the age, has a longstanding interest in economic history, and has spent a lifetime — beginning on a dairy farm in Illinois — studying and thinking about the economics of agriculture and the role of government policy in it. Writing a book on American Agriculture in the Twentieth Century provides a context for Gardner to draw together his many well-founded and useful insights from various threads of his professional work on issues such as farm incomes, the “farm problem,” the structure of agriculture, agricultural technology, the relationship between agriculture and the broader economy, and the causes and consequences of government policy related to agriculture and the rural sector.

The book is targeted at a general audience, though it is not short on numbers and details, so that is has plenty to offer professional economists and even specialists in agricultural economics. It begins with an “Introduction” that sets the scene in terms of the broad sweep of major changes in the century. The meat of the book begins in Chapter 2, titled “Technology.” This is a most appropriate place to begin, given the pivotal role that technological change has played in the transformation of American agriculture, perhaps especially in the latter half of the twentieth century when agricultural productivity grew most rapidly and the pace of the other developments accelerated as a consequence. To this reviewer, at least, the technological story is the main story, and it is a strength of Gardner’s analysis of the economic history of American agriculture that he places technology at the forefront.

Chapter 3, “Farms” documents and discusses the early rise and subsequent slow decline in the quantity of farmland; the decline in the numbers of farms and their progressive growth in size and specialization; changes in input use and how farms are organized; and the roles of on-farm versus off-farm work. Much of these changes in farms and farming were fueled by changes in agricultural technology and productivity, as well as changes in the non-farm economy that drew labor away from farming. To conclude the chapter, Gardner compares income over time between farm and non-farm households and reports that, during the past fifty years in particular, farm incomes improved to achieve parity with non-farm incomes, and to achieve a more equal distribution among farm households. Later chapters demonstrate that these changes reflect, in part, a closer integration of the farm and non-farm economies such that farm and rural household incomes are determined for the most part by events outside agriculture. Similar findings are reported in Chapter 4, which extends the discussion to “Farm Communities.” As the farm population has declined and become older, so has the total rural population; many small towns have vanished and much of the infrastructure has declined as well. Gardner discusses the related issues of changing demographic characteristics of the rural population, out-migration and hired farm workers, rural poverty, schooling of farm people, quality of life and technological change, natural resources and the environment, and large farms and the rural community. He provides evidence on the declining incidence of rural poverty and income inequality, as well as documenting what many have perceived as a set of undesirable trends in rural America.

The next three chapters are devoted to the roles of changes in markets and government policy in the evolution of agriculture. Chapter 5, “Markets,” discusses changes in the markets for farm inputs and commodity outputs, and evidence on concentration and market power of agribusiness firms. Along with improvements in market efficiency for other reasons, technological change in food processing and marketing has contributed further productivity growth to the food industry, but at a slower rate than in the farming sector. A primary consequence of comparatively high productivity growth in the farming sector has been declining farmers’ terms of trade — prices received by farmers for their products not growing as fast as the prices they pay for their inputs. This fact, coupled with the observation of growing concentration of agribusiness, and a declining farmers’ share of the consumers’ food dollar, helps account for some of the government policies applied to agriculture, which are the subject of Chapters 6 and 7.

Chapter 6, concerns “Public Investment and Regulation,” including topics such as market institutions and infrastructure, and what Gardner terms “rural industrial policy,” as well as a host of regulatory interventions in agriculture, some of which may be seen as serving a public interest while others, such as some “marketing-order” regulations, clearly involve net social costs and are there to serve a narrower sectional interest. Information is presented on the net social costs of some of these interventions as well as on the net social benefits of public investments in agricultural research and development.

The evidence is generally less mixed on the net social consequences of the “Commodity and Trade Policy” interventions, which are the subject of Chapter 7. The chapter provides a very useful descriptive history of the farm commodity programs, which began in the 1930s, including trade policy as an essential element since most farm commodities are at least potentially traded goods. It also deals with food policy, the benefit-cost analysis of farm programs, and farm politics. Gardner is the authority on the economics of U.S. farm commodity programs and his opinion matters, but he presents a surprisingly equivocal view on the net social impacts of those policies, such as when he allows (p. 213) that “reasonable arguments have been put forward that U.S. commodity policies have been an important contributor to the growth of agricultural productivity.” Productivity growth since 1950 has averaged about 2 percent per year, and it is cumulative, yielding benefits in recent years worth about half of the value of annual agricultural output. Given that commodity programs involve deadweight losses of only a few percent of the total value of output, if the same programs accounted for only a small fraction of the total productivity growth, they could have yielded important net social benefits. Gardner does not go so far as to say this, but nor does he explicitly rule it out, and he provides supporting arguments for the possibility in Chapter 8.

Chapter 8 is devoted to “Explanations” of the economic development of U.S. agriculture, including the growth of output, productivity, and the per capita income of the farm household, but also the decline of agricultural GDP since the 1970s. Gardner reports that the evidence is not clear on the extent to which farmers have benefited from technological change, although the nation has reaped large benefits, and he discusses other — mostly non-farm — factors as sources of improvement in farm household incomes, for which he offers his own econometric findings using less-aggregative data in Chapters 9 and 10.

To this point the story has been told largely at a national level, but the agro-ecological conditions of climate, soil, and terrain, and infrastructure, as well as other relevant elements of the economy, are very diverse across the United States. Consequently the nature of agriculture and its economic history are very diverse among states and regions of the country, and a great deal of interesting detail is foregone when we consider just the national aggregate. Chapter 9, “Regions and States,” provides some more disaggregated details on states and regions, including some statistical analysis of patterns of growth and incomes among them. Chapter 10, “Counties,” reports results from further statistical analysis of data at a more-disaggregated level. A key finding is that growth in farm household income is explained mainly by market adjustments that brought farm labor earnings more nearly into line with the rest of the economy — by variables that are mostly exogenous to the agricultural sector.

Chapter 11, “Findings and Policy Implications” concludes the book. In this chapter Gardner reminds us of a recurring theme, that a host of conceptual and measurement issues must be dealt with even to begin to describe what has happened to “farms” and “farm incomes” and so on. Even still, the main story is clear enough in terms of the gross changes in numbers and sizes of farms and related rural populations, the nature of farms and farming, and the distribution of farm household incomes. To account for these changes is harder given the roles of multiple interacting possible causes, common trends, and data limitations. While technological change driven by private and public agricultural R&D was surely the primary driver of change on farms, its consequences were at least modified by the accompanying developments of infrastructure, education, markets, and government policies, and it was encouraged and its effects were reinforced by changes in the non-farm economy.

This is a valuable book, and I would recommend it to anyone who is interested in the economics of agriculture and its history. It is both technically sound and of interest to specialists, but also accessible to a much broader audience, including non-economists. The scope of the book is ambitious, and we should keep its scope and broad intended audience in mind in deciding how and where to find fault. Keeping that dictum in mind, here are some observations. First, the style and technical content of the work varies among the chapters. The early chapters emphasize mostly verbal and some graphical analysis, and should be entirely accessible to a wide audience, but in some of the later chapters the work drifts towards a more technical and academic style.

Second, like much of U.S. agricultural economics, the book is somewhat U.S. centric (which might seem to be an odd comment to pass on a book that is specifically about American agriculture). The book does deal with international trade in agricultural commodities, mainly in relation to trade policy, but it does not go very far to contemplate American agriculture in the context of global agriculture. Importantly, most agricultural commodities are tradable and traded, and growth in international trade and evolving comparative advantage have been important elements of the history. Through commodity markets, changes in the United States reflect and are reflected in changes in agriculture in other countries. Further, agricultural technologies are internationally mobile. It is no coincidence that, around the world, similar changes were taking place in agriculture in many countries at the same time as they took place in the United States, or soon after. To understand both the causes and the consequences of changes in American agriculture it is appropriate to recognize these international linkages. For instance, the consequences for American agriculture from technologies developed as a result of U.S. public agricultural R&D depend importantly on the extent to which increased U.S. supplies are absorbed in international versus domestic markets, tempered by commodity policies, and the extent to which the same technologies can be adopted by international competitors. Defining the relevant counterfactual is tricky when we have to contemplate international interdependencies in policies as well as technologies. If another chapter or two could be added to the next edition of this book, I would propose using them to contemplate international comparisons, and the causal connections among the agricultural histories of nations.

Finally, it would have been nice if Gardner had presented a more conclusive analysis of government intervention in agriculture and its net consequences. He leaves us wondering where he stands on whether U.S. farm commodity policy has imposed a net drain on the economy. Over many years, legions of agricultural economists have presented analyses that stressed deadweight losses from farm programs, but these studies did not make any allowance for the possibility that the stabilizing effect of farm commodity programs might have stimulated investment in productivity-enhancing technological change that offsets the conventional static deadweight losses. Gardner’s personal, view not just of the possibility but also of the likelihood of this outcome, would have been very welcome. On the other hand, by playing the devil’s advocate and raising this question, the author has given us a reason to reflect on the conventional economist’s (perhaps ideological) view of the deadweight burden of farm commodity programs, which might not be fully supported by evidence from past analysis, and an agenda for research to develop the evidence. The book is provocative on other subjects, too, as Gardner makes a consistent effort to present both sides of issues, drawing attention to some oft-neglected costs associated with an economic history that has been by most measures one of remarkable positive achievement.

Julian Alston is a co-author of Making Science Pay: The Economics of Agricultural R&D Policy (with P. Pardey), AEI Press, 1996, and “The Incidence of Agricultural Policy” (with J. James), Chapter 33 of the Handbook of Agricultural Economics, B. Gardner and G. Rausser, editors, 2002.