The Farm Legacy of Henry Wallace: Regressive Subsidies

Henry A. Wallace, the subject of Benn’s recent political biography, was FDR’s agriculture secretary during his first two terms, from 1933-1940. This period marked an enormous expansion of the department, the government’s largest, with staffing soaring from 40,000 to 146,000. Government payments to farmers over these years totaled, in current dollars, an eye-popping $1.2 trillion.

Though Wallace was a self-styled champion of “the Common Man,” he was at fierce loggerheads with the most liberal element of his department’s staff over the allocation of those subsidies—which was exceptionally regressive. The top 1 percent of farmers by income collected 20 percent of the benefits. Millions of impoverished tenant farmers received virtually nothing, and many saw their livelihoods diminished by the Wallace policy of paying farm owners not to grow (or even to rip up planted crops and prematurely slaughter millions of hogs).

Three reasons stand out for this extreme bias in subsidy direction. The first is Wallace’s fidelity, as a farm owner himself, to the Jeffersonian belief that farm-owning families were the backbone of American democracy. “I believed that a stable civilization demanded a nation of landowners,” Wallace would recall in retirement. The second is Wallace’s belief in a “planned economy.” He saw government-assisted farm education, technological profusion, and scale economies as the quickest and surest route to universal “abundance.” These beliefs lay behind his earlier support for Stalin’s collectivization. The resulting U.S. subsidy payment formulas encouraged consolidation of fields into large, mechanized farms. Finally, Wallace deduced (correctly) that his personal political fortunes were tied to his success in helping FDR maintain good relations with Southern farm barons, who were critical to the Democratic political coalition.

Fast forward to today, and little has changed. As shown in the graphics above, American agricultural subsidies are heavily skewed toward large commercial farms. Over the past two decades, the top 1 percent of recipients have accounted for 27 percent of subsidy payments.

As in the 1930s, agricultural subsidies—that is, payments to promote the growth of specific crops, research and development, and conservation; as well as to provide disaster relief—are overwhelmingly directed to commercial farms. Commercial farms, those with gross cash farm incomes above $350,000, constitute less than 12 percent of U.S. farms, yet receive nearly 62 percent of subsidy payments. Even per acre, as we show in the right-hand graphic above, they are benefiting 30 percent more than their residential counterparts.

The phenomenon of regressive farm subsidies is mirrored in Europe. In the poorest 10 percent of regions, payments average €1,200 per full-time agricultural worker. In the richest 40 percent of regions, they average €6,000 to €11,000.

Given that large-scale agricultural subsidies were initiated in the 1930s with the supposed aims of mitigating rural poverty and stabilizing the incomes of farming families, the fact that such subsidies have evolved in ways antithetical to a progressive ethos should spur root and branch reform on both sides of the Atlantic.