What am I going to do about
it?
More than any other group,
farmers suffer during the mid-1880s through the mid-1890s.
Unlike industrial workers,
they lived in isolation.
1867 GRANGE – social group.
Bring farmers together, alleviate isolation
Once they started talking,
they found that they shared two problems
1) debt
2) railroads taking advantage
DEBT
Prices dropped through the
1880s
Overproduction drives down
prices further
Debts accrues to local
merchant
With falling prices
(deflation) the debt is actually growing even faster
One crop (staple) – price
drops, they go broke
RAILROADS
One railroad – high prices
for transport
Grain elevator operator
gouges him.
Forces beyond his control,
that he does not comprehend are determining his fate.
Hates middlemen.
Producer ethic – those that
produce tangible goods are the backbone of the country. Financiers are
parasites – they shuffle paper, they don’t produce anything.
During the ’70s and ‘80s –
laws to regulate prices; keep farmers from being exploited.
Standard grain prices set in
Chicago for different grades of grain.
Buyers must buy at set prices
In isolated communities, the
rules get bent
Farmers realize they’re
vulnerable; become suspicious.
But even if they are paid the
“standard” rate – this isn’t the issue.
They resent the whole system
in which they were kept from controlling their own fortune.
Farmers had moved to the
western plains to escape the system of wage labor, debt and credit they found
in the east. To maintain ECONOMIC INDEPENDENCE
But when they got west, they
found the same system waiting for them.
Evil conspiracies afoot. “Progress” as defined in the east was
destroying the farmer. The nation’s character was at stake.
When farmers complained, they
were told they were producing too much (OVERPRODUCTION)
They thought the problem was
UNDERCONSUMPTION. Middle men charged too much for food and reaped the profit
while consumers and farmers lost out. Food becomes too expensive for people to
buy so farmers lose out.
The key was to get around the
middle man
What to do about this situation?
1) self-help
2) government help
1) COOPERATIVE ACTION
Bargain directly with
manufacturers to get cheaper prices on supplies.
Reapers for $175 not $275;
wagons for $90 not $150.
Manufacturers lower prices;
local merchants follow to remain competitive
Granges get their own
ELEVATORS, MILLS, PRODUCTION PLANTS
In Iowa, local Grange even
begins to manufacture its own farm equipment
Also, education, public relations
campaign to broaden base. GRANGES become ALLIANCES become regional and national
ALLIANCES
CREDIT PROBLEM
Subtreasury system – borrow
money from state govmt for up to 80% of the value of their crops. 1%
interest. Stored in govmt warehouses as
collateral. Farmers could choose to withhold their crops so not everyone would
bring the crop to market at once.
RESPONSE
Merchants cry “socialism!”
Nope. These farmers see
themselves as the “true” capitalists – they want their piece of the pie. They’re hustlers – they want profit for their
goods.
Banks won’t lend money to the
co-ops to purchase supplies; merchants risk short term losses to undercut
co-ops prices.
2) GOVERNMENT ACTION
Other problem – Railroads.
Can’t build your own railroad. Get govmt to regulate them.
Granger Laws = set maximum
rates for transport and elevators.
OK, but the conglomerates
still exist – angers farmers. Government (people) should own railroads.
But they are suspicious of
govmt power, too.
STILL,
Movement must be
political. Alliance men were becoming
Populists.
Better to found a third party
or to gain influence in one of the two major parties?
Third Party – you can remain
true to your principles and perhaps eventually capture enough votes for other
parties to pay attention to your demands
Join the Democrats or
Republicans – more immediate influence since the two parties are evenly
divided; winner take all electoral system means third parties have no seats in
the legislature, so cooperating with one of the parties that can win is better
Currency issue –
Not enough cash to satisfy
the demands of a growing economy.
Gold Standard prohibits
government from printing more money that there is gold to back it up.
When there isn’t enough
available cash, demand for cash goes up. Cash is more valuable, so it buys
more.
When $1 buys more than
it used to, prices go down since the $1 is more valuable. This is
DEFLATION
So, Value of a dollar goes
up --- prices go down
DEFLATION hurts debtors.
Their debt remains the same (i.e. $100) but the VALUE of $100 goes up so, in
essence, their debt is also going up. That $100 is worth more, so they are in
debt for more.
If the government prints more
money, dollars decrease in value. They buy less – this is INFLATION.
Dollars are not worth as much
– they buy less – so prices rise. You have to pay more dollars to buy the same
amount of stuff since the dollars aren’t as valuable.
INFLATION hurts creditors.
When they are paid back, the money (i.e. $100) they get back buys less, so it
actually isn’t worth as much. This means
that even though they got back their full $100, they still lose money since
that $100 isn’t worth as much.
Election of 1896 comes down
to the issue of the currency:
Gold Standard vs Inflation
(adding silver as a metal that backs up the currency so more currency can be
printed)
Gold Standard wins. People
fear inflation will bring instability to the economy. Consumers and workers
fear higher prices. Higher prices can result in fall in demand and precipitate
layoffs in factories.
Soon the point is moot since
huge discoveries of gold in the West and in South Africa make more gold
available for the government to buy (by issuing bonds) and, with more gold in
reserve, the government can issue more dollars.