Resolved: That the United States should substantially change its federal agricultural policy.

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Source: American Journal of Agricultural Economics, Dec 1997 v79 n5

Title: The American states and their evolving impact on agricultural
policies.(Agriculture and the Changing Nation-State)
Author: William P. Browne and William Knudson

Full Text COPYRIGHT 1997 American Agricultural Economics Association

Although agricultural analysts have spent a considerable amount of time studying the effects of national policy institutions and processes, little is known about what impact the American states and their politics have on agriculture (Schuh, p. 1328). This is not surprising. The general effects of state governments on public policy are largely unexplored in any comprehensive way (Browne and VerBurg, p. xi). This is unfortunate because many American states increasingly do more while the national government does less. In effect, the states do what federal officials will not do in public policy.

Although this analysis cannot fill the void in state agricultural policy, it does accomplish two things: It explains why the states are doing more, and it explores the implications of states doing more in the agricultural sector. Specifically, it asks, given the variation in the political transaction costs of securing information and negotiating agreements as imposed by policy decisions (North), whether some places are better than others for agricultural producers and firms to do business in. Moreover, it asks why these places are better for sector interests.

The States Do More

Intergovernment relations in the United States have been muddled for the past few decades, but one thing is clear: the American states are individually required to do more. The reasons are many, complex, and too often given to simple explanations. For example, some reduce the whole shift to one of federal government failure. That interpretation is essentially ideological and a political smokescreen. It also empirically defies generalizability.

Yet federal policy failure in some important areas is indeed one of several reasons for the shift in policy to the states. Others include diminishing federal budget support for the states and their local governments, a desire to be more effective on regional matters than federal policy can manage, the lingering federal budget deficit and resulting cuts in public programs, the need to update government, a popular sentiment to reduce the size and costs as well as the intrusiveness of national (or "big") government, and the political astuteness of federal officials who have cut their operations by simply placing policy mandates on the states (Pagano and Bowman).

The interplay of these motivating forces produces an odd and often confusing mix of responses. The federal government still does a great deal, but it always threatens to do less. The states are forced to do more, often things that state policy makers fail to value, and with less overall financial support. Moreover, state officials cannot simply back off in exercising their policy responsibilities. Their citizens want things and get testy when they fail to get them (Gold).

Multiple responses and the effects of these several policy forces create fascinating agricultural policy making. Let's look at the mid-1990s, which in a few short years produced public policies and responses in all directions. Start with FAIR (the Federal Agricultural Reform Act) or the 1995 farm bill. This was not, as is often suggested in the media, a policy revolution. Rather, it is about waiting to see - or, more accurately, a "wait and see" - farm bill.

FAIR abandoned price supports for slightly smaller direct subsidies for producers but with a built-in phasedown in dollars and an implied yet vague promise of ending price programs in the early twenty-first century. This was not a difficult decision because higher commodity prices at the time of the bill made it feasible and acceptable (Paarlberg and Orden, p. 1309). Simultaneously, however, FAIR kept permanent price support legislation of 1949 in place, making it likely that federal farm price programs will reemerge in tough times when farm incomes fall (Johnson, p. 1327). However, given federal budget problems, if they reemerge, they will do so at lower levels than previously. Thus, the federal government, despite its threats of withdrawal, continues to rather uncertainly control federal price policy.

On environmental standards, FAIR moved in quite another direction. The Environmental Quality Incentives Program (EQIP) did that now familiar shift to the states (Ervin and Schmitz). The states are allowed (and must because of performance standards) to do more to deal with local conditions. Doing so follows several previous environmental initiatives important to agriculture, such as the Coastal Zone Management Act and the Clean Air Act. All have penalties for state noncompliance and are enforced by federal agencies.

The competing expectations of FAIR have not simply imposed environmental mandates on the states. The states have been impacted greatly by agricultural clientele who want government assistance because they have become accustomed to it. Federal subsidies decline, the threat of eventual removal looms, and discussions of a growing state government role generate new policy demands. Thus, state politics gains client attention in ways to which its policy makers have not been accustomed.

Research, land grant colleges, and extension are not the only items on advocacy agendas in the states. State largesse for producers and processors and for environmental and consumer issues inspired by federal shifts downward are also on these agendas (at least the hoped for results of that shift are). The demands for largesse are often (to make things more confusing) hidden within environmental, property rights, or other conflicts. For example, family farmers troubled by possible federal abandonment look cleverly to EQIP to attack and restrict corporate hog facilities. The logic is simple: Keep farm income up through the power of the state, whatever that power may be. The source of that power does not matter as long as it works to protect farm incomes.

The result, then, can be simply stated: As general policy uncertainty escalates regarding the future of the most prominent types of national agricultural programs, the American states are under far more pressure to do more on various agricultural policy issues.

Can the States Be Effective?

The answer is obviously yes. However, the question really is, At what can they be effective? The American states are very diverse in their political and economic structures. What characterizes and applies to one does not necessarily characterize and apply to another (Gray and Lowery 1996). Thus, some states will be effective at policy innovation, and others will not. Some states will reduce the size and scope of government, and others will fail to do so. Some states will respond to agricultural interests, and others will not have time for them. Some, but far from all, will respond especially well to those in conflict with traditional agricultural interests.

Thus, some things must be considered when searching for a state that pursues policy innovations, keeps taxes low, or listens to some portion or another of the agricultural sector. A single state probably will not do all three.

Why does this variability exist, apart from obvious differences of geography and weather? To answer this question, the federal government, with its great capacity to make policy making extremely difficult, can be looked to as a model.

National decision-making processes are bogged down in a plethora of heavy- and high-cost transactional circumstances (Bonnen). The number of organized private interests commenting on agriculture grows with each farm bill. Well over 200 groups and institutions now want something included in any farm bill (Browne and Cigler, p. xxi), but there likely are more than 300 because of continuing growth in lobby numbers in the late 1980s and early 1990s.

The pressure of so many organized interests means that agricultural policies take longer to develop and pass and that the end product of legislation is noncomprehensive and technically unsystematic in a national policy sense (Browne). As a consequence, policy changes are incremental and not directed to underlying sector problems (Bonnen and Browne). As Mancur Olson (pp. 41, 73) suggested, more organized interests mean more public policy, more regulation, and more public officials. More organizations flourish, or at least exist, within both the executive and the legislative branches as well. After all, advocates from the private sector need champions in the public sector.

Congress no longer has one major committee in the House or the Senate that dominates agricultural policy. Power and decision making have moved to the subcommittee level (Bonnen and Browne, pp. 21-22). As the number of organized interests has increased, so has the number of congressional subcommittees that address issues brought up by narrowly focused private interests. The subcommittees work closely with related organized interests and over time come to share the same values and beliefs of those interests (Kollman). Additionally, congressional members who serve on the subcommittees tend to be from districts that have a large interest in matters of jurisdiction, especially as constituents.

The high cost of federal elections and the need to use - and pay for - the media to win has encouraged legislation to include numerous favors for multiple interests. Accordingly, farm bills expand in size. The growth of all these things, from subcommittees to taking care of local constituents, has further eroded an already very weak set of national political parties. No one can coordinate all the variables required to pass agricultural legislation.

Congress is far from alone. Agencies of the administration add to piecemeal and unsystematic policy making. Responding to the needs of narrowly focused interests provides a constituency for an agency. In turn, this constituency protects the agency, especially from those wanting budget deficit reduction or policy change. It is also in the enlightened self-interest of agency staff to maintain its programs and policies to ensure influence as well as employment. This matters because these staff provide much of the expertise and information not only to others in the executive branch but to Congress as well. Advice is rarely neutral. All this is a formula for valuing and maintaining the status quo. For anyone or everyone to innovatively manipulate federal agricultural policies is an effort that carries extraordinarily high transaction costs.

Some states are different, so the transaction costs of doing political business in those places are lower for those who want such things as innovative programs, less government, or favors for a group, a firm, or an entire sector. Some (even most) states have stronger chief executives than does the federal government (Beyle, pp. 221-38). Subcommittee structures are rare in the state legislatures. Committees also tend to be far weaker than those in the federal government (Hamm). Parties tend to be stronger forces in galvanizing public policy makers or in keeping a winning majority together for a common purpose (Patterson, pp. 184-88). Most states, which are more homogeneous than the nation as a whole and have a more limited range of natural interests, have far fewer lobbies to negotiate with and satisfy.

Also, states do not have to waste their decision-making energies on macroeconomic policies. Doing so at the federal level limits policy options. Federal officials must balance off concerns over the budget deficit, the national debt, worldwide economic integration, monetary policy needs, and the Federal Reserve and its initiatives. Foreign affairs does the same to federal officials. Federal agricultural policy makers in particular are mired in conformity to trade agreements, living with a reduction in trade barriers, and dealing with trade balances (Klein and Kerr, p. 552). Foreign policy agreements on other matters, such as defense, also enter the picture. All this consumes policy energy and limits policy options. Thus, for those who want significant policy changes, some of the states are far better places than Washington in which to look for them.

So What?

Two things are important. First, the states may in general be better places than Washington for developing and implementing new agricultural policy initiatives. Second, some states are unquestionably better than others.

However, finding which states are better is not easy to do. States that have more organized interests do, as Olson suggested, have more public officials (Gray and Lowery 1996), but neither dense interest environments nor a diverse array of private groups and private institutions lead automatically to any particular policy outcome (Gray and Lowery 1988). More interests and more kinds of interests only raise the costs of political transactions. Contrary to Olson, those conditions seldom stop policy innovation but only make such innovation more difficult. Far more political will, along with far higher associated lobbying costs, are required to make things happen in high-transaction-cost environments.

Some illustrations will help make this point. Illinois (Gove and Nowlan) has nearly 3,500 registered lobbyists representing over 1,200 organizations. The Illinois Farm Bureau (IFB), in a state where agriculture truly matters to the economy, is but one of ten of the most influential interests in the state. In addition, the IFB is far from the most influential, as the state medical society, a teachers' union, manufacturers, bankers, and even trial lawyer rated higher in influence. Thus, Illinois agriculture must work proposals and politics through with other segments of state society to achieve its policy objectives. Accordingly, those lobbying from the sector have heavy workloads and share numerous frustrations. Policy develops slowly and only after much work with the state's large and able public officialdom.

Providing a counterpoint is North Carolina (Fleer, pp. 177-79), which has only about 25% of the lobbyists and organized interests than Illinois has. Although agriculture shares influence, the state's farm bureaus are not the primary sector interest. Others can win without farm bureau endorsement. State legislators and executives are amateurs in comparison to those in Illinois, and they are much fewer in number and more limited in expertise. Nonetheless, these conditions make it feasible for an agribusiness interest, such as corporate hog producers, to come into the state, gain relatively quick policy responses to support the industry, and not engender burdensome policy conflict. The policy process is marked by far lower transaction costs.

Other examples abound of state differences in relative transaction costs. Iowa, long split by conflicts between moderate- and larger-scale producers and those in different regions of the state, are at war within the Iowa Farm Bureau and state government over large hog operations. In many ways, Iowa agriculture lives with the divisive legacy of the modern farm protest of the 1980s. Those conditions perplex state officials, who are otherwise quite sympathetic to the economically dominant agricultural sector and who are in a less bureaucratized environment. Still, interest fragmentation makes Iowa a tough place to lobby for large hog farm interests and many similar agribusiness ventures that depend on economies of scale.

California is no less difficult or a state with lower transaction costs. In most ways, it is the worst, especially for sector industries. Agricultural interests proliferate, bureaucrats abound, legislators in the California General Assembly are hard to reach, and environmentalists constitute a major segment of the state's public. Lobbying from the sector, not unexpectedly, is inordinately difficult and costly. Also, California is beset by internal disagreement. Agribusiness firms attempting to industrialize hog production would be hamstrung in Sacramento.

Michigan could be much like California, only on a slightly smaller scale, but generally it is not (Browne and VerBurg). Interests concerned with agriculture are fewer, most cooperate under the auspices of the Michigan Farm Bureau, the sector itself faces declining conditions, and more accessible state legislators open their doors easily. Farmers also control several key positions in the state legislature. Thus, transaction costs are notably lower here than in California, in Illinois, or in national politics. The only exception is for water pollution problems, on which agriculture comes head to head with numerous interests, from social groups such as environmentalists to businesses zealously concerned about the state's abundant and badly contaminated waters. Water policy in Michigan shows how resource characteristics also affect state politics as well as state-by-state variations in transaction costs.

The underlying significance of all this should be quite apparent. Agricultural interests, and the analysts who advise them, need look only to some of the states as likely governments for policy innovation. Policy innovation of any kind - from doing more with less to doing things quite differently - is difficult, so why make it more so? The federal government discourages innovation, as do many states, especially on certain types of issues and policy goals.

In a sense, as agricultural and agro-environmental interests look for friendly places in which to sell policy innovations, in the future those interests will likely remind observers of manufacturing industries. Not many years ago, manufacturers commonly chased after state tax incentives as different governments sought to recruit plant relocations (Portz). Agricultural interests, although somewhat more geographically bound, will undoubtedly do similar chasing in the future. That is, they will look for governments that will not make attaining valued policy goals either excessively costly or unattainable. Doing so will provide many opportunities for agricultural analysts, provided that they can work well with others, be approachable, drop any arrogant pretensions, and do commonsense analysis.

There is no senior author. The authors were very much equal partners. and the judgments made here are exclusively their own.


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Bill Browne is professor of Political Science. Central Michigan University. Mt. Pleasant, Michigan; Bill Knudson is Agriculture Policy Advisor, Senate Majority Policy Office, Lansing, Michigan.

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