United States History, 1877-
Revolt of the Rural Poor Majority:
Farmers Confront the Changing Economy, 1870s-1890s
As the American farm became more productive, ironically, the fewer of them was needed in the economy as measured by demand. This spelled hard times for American farmers (who still comprised the single biggest occupational category) who saw their commodity prices fall and the standard of living for their families decline.
The farmer also had three very specific problems: he consumed goods and services in a marketplace dominated by big business (monopoly), he sold his product in a marketplace dominated by big business (monopsony) and he was chronically saddled with debt.
Small Farmers and Big Businesses
Buying plows, shoes and credit in the new nation-wide marketplace placed the farmer (an individual) at a disadvantage since the giant producers and retailers did not need one individuals business. The old methods of negotiating had depended on face-to-face relationships. This kind of relationship the farmer could not hope for with Sears, Montgomery Ward and International Harvester. The economic term for a market dominated by one or a few powerful sellers is "monopoly."
Selling his grain or cotton to international brokerage houses also put the individual farmer at a disadvantage in two ways. The commodities brokerages did not care whether they got his individual bale of cotton or not since they dealt in tens of thousands; thus, they need not negotiate price with individual farmers. Typically, they did not have to negotiate, anyway. The village commodities buyer usually was the only potential customer to whom the farmer could sell his goods. The economic term for a market dominated by one or a few powerful buyers is "monopsony," a buyer's monopoly.
Since everyones crops matured at about the same time, harvest time was the worst time to sell due to the temporary glut of the commodity on the marketplace. Usually, farmers could not hope to hold their crop and negotiate at harvest because of the impact of debt on their lives. Their mortgages, retail credit, doctors bills and other obligations were scheduled for repayment at harvest time.
Farmers and Railroads
One problem facing farmers as both consumers and producers was the near absolute power over local economies exerted by monopolistic railroad companies. Often, farmers charged, freight rates were arbitrary and unfair and discriminated against small shippers. Railroads, they claimed, regularly engaged in price-fixing and other restraints of trade.
Debt and Deflation
Debt killed farmer chances of security and independence. And, yet, most farmers borrowed every year as a result of commodity prices too low to provide incomes large enough to sustain the farm family from harvest-to-harvest.
The single biggest drawback to debt was the cycle of monetary deflation brought on by government policy and the depressions of the 1890s. In a deflationary cycle consumers experience problems opposite from inflation. Over time prices go down, but then so do wages and farm prices. In other words, as the supply of money shrinks (deflation), money becomes worth more relative to other goods and services. People who are trying to earn money to live on suffer. People who are trying to earn money to pay back debts get eaten alive.
Examples of deflation:
Price farmers got for
1881 $ .11 $1.20
1891 $ .08 $ .83
1892 $ .07 $ .62
1893 $ .05 $ .53
Imagine taking out a mortgage in 1881 when corn was bringing $1.20 per bushel and trying in 1893 to make payments on a debt whose face value did not change while the value of your commodity dropped by over half. The lender benefited from governmental deflationary policies because the money he was repaid with was worth more than the money he loaned out. See the textbook for a further explanation of the governments decision to re-adopt the gold standard, the monetary policy that farmers most identified as the source of their trouble.
The Granger Movement
At first farmers tried politics as the remedy through a rural social organization known as the Order of the Patrons of Husbandry known as the Grange.
The Granger movement spread across the Midwest and into the South. One remedy they tried was governmental regulation of railroads. In several Midwestern states legislatures with Granger leadership passed freight rate regulations designed to force railroad companies to compete, publish honest rates, and not discriminate between shippers. Shortly thereafter the railroad corporations got judicial relief when the Supreme Court declared these laws unconstitutional. Thus, farmers came to view political remedies as futile.
The Farmers Alliance
A new farmer group was born in Lampasas County, Texas, in the 1876. It failed to grow for about ten years and then took off in the 1880s. This new body called itself the Farmers Alliance and spread east across the South and north across the Great Plains states and the Midwest. While black farmers were organized into separate Colored Alliances, the fact remains that the Alliance was the only biracial organization in the South and, with the exception of the Knights of Labor, possibly the nation.
Assuming that only economic action would save the day, the Alliance stayed out of politics at first and advocated economic cooperation between farmers.
Alliance Exchange stores were set up to buy farm implements and other goods in huge quantities sufficient to force suppliers to bargain in good faith. The largest Farmers Alliance Exchange Store was located in Dallas, Texas. These Exchanges were openly critical of profit-taking and operated only for the benefit of member farmers.
Furthermore, the Alliance urged the Alliancemen, as they were known, to collectively market their crops. Cotton brokers found themselves bargaining for 1,000 bales of cotton instead of dictating terms to the ten-bale individual farmer.
The corporations simply proved themselves superior to the Alliance in economic power. They boycotted the Alliance and refused to sell to, or buy from, Alliancemen. Eventually they destroyed the Farmers Alliance.
But, as the chief historian of the movement put it, the Alliance had managed to develop a movement culture among the rural poor majority. Even as it died, the Alliance reconstituted itself as a political protest movement.
The Peoples Party
Formed between 1889-1890, the Peoples Party was simply the Farmers Alliance reborn as a political vehicle. Also allied with the Alliancemen were the Knights of Labor. In a sense then, the Populist were simply ex-Alliancemen and ex-Knights whose radicalism had outlived their previous institutions.
Great variations existed, but the most radical of the state parties were Georgia and Texas. In Texas the gubernatorial candidate was a Christian socialist District Judge from Stephenville named Thomas Nugent. In Georgia the gubernatorial candidate was white farmer Tom Watson who actively recruited black campaign workers. On one notable occasion, Watsons hillbilly followers rode through the night with shotguns to protect a radical African-American Peoples Party lecturer from a white lynch mob.The Populist platform called for many reforms; chief among them were:
(While the two older parties may seem more familiar to twenty-first century Americans, students may wish to acquaint themselves with the 1890s versions of the Republican and Democratic parties, as well.)
1. Free silver -- This slogan was the shortened version of "the free and unlimited coinage of silver." By that they meant that once more silver should be turned into currency or used to back currency for the purpose of increasing the money supply. Inflation of the currency would drive up the prices farmers could get for their crops. This would help relieve the years of deflation they labored under.
2. Progressive Income Tax. -- By this the Populists meant graduated rates of taxation that reflected taxpayers' ability to pay. Or as the Populists put it: "to the end that aggregated wealth shall bear its just proportion of taxation." This was in response to centuries of revenue-gathering methods (tariffs and property taxes) that fell most heavily on those less able to pay.
3. Subtreasury Plan -- Here the Populists were calling for a sort of farm price support through government backed crop storage and lending facilities. The Sub-Treasury Plan had been one of the decisive factors leading Populists out of the two old parties, neither of which supported it. First proposed by the Farmers Alliance, government-run local sub-treasuries would have amounted to warehouse-banks where farmers could deposit crops and withdraw a portion of their market value for cash flow purposes while awaiting better market prices.
4. Government ownership of key industries -- The Populists called for social necessities ("public utilities"), such as the means of communication and transportation, to be publicly owned and administered. Populists' main target were the railroads which loomed so largely over the farm economy. As one Populist put it, "either the people must come to own the railroads, or the railroads will surely come to own the people.
Read the text of the 1896 Populist platform.
Fusion and defeat, 1896
In 1896 the left wing of the Democratic Party responded to the Populist challenge by adopting the most popular plank in the Peoples Party platform calling for inflation through a return to a bimetallic (silver and gold) money standard. The 1896 Democratic candidate, William Jennings Bryan, inspired the Populist Party to co-nominate him with his famous Cross of Gold speech before the Democratic Partys National Convention.
Depicting the "theft" of the Democratic Party by the agrarian Left during the presidential election of 1896. Conservative Democrat Grover Cleveland pursues his stolen Democratic Donkey as a policeman.
Despite the nomination of the two parties, Bryan lost the election of 1896 to Republican William McKinley whose party advocated retaining the gold standard.
Fusion with the Democrats split the Populist Party and led to its demise. The label populist has survived for a hundred years, often used to label candidates or movements who adopt the language or style of the poor majority.
Historians' interpretations of the "Populist moment" have ranged from positive to harshly critical, dependent, in part, on each historian's personal ideology and cultural baggage. In the view of some, the Populist critique was founded in ignorance and even bigotry. The other view has it that these rural protestors represented a democratic and humane alternative. What do you think?