American Hydra: The Many Heads of Corporatism — Part 1

USDA, from the “People’s Department” to a Subsidiary of Big Agriculture

“The Agricultural Department, under the supervision of its present energetic and faithful head, is rapidly commending itself to the great and vital interest it was created to advance. It is precisely the people’s Department, in which they feel more directly concerned that in any other. I commend it to the continued attention and fostering care of Congress.” — President Abraham Lincoln

The USDA was created because agriculture represented the largest single industry in the US at the time with over 50% of the US population engaged in some capacity in it. Lincoln, being born a farmer said “Agriculture, confessedly the largest interest of the nation, has not a department nor a bureau, but a clerkship only, assigned to it in the Government. While it is fortunate that this great interest is so independent in its nature as to not have demanded and extorted more from the Government, I respectfully ask Congress to consider whether something more cannot be given voluntarily with general advantage.” Thus the US Department of Agriculture was born in 1862 with the original intent to provide information on the newest and best methods and tools for improving agricultural production.

By the 1880’s, the Industrial Revolution in America was in full swing and food production was being modernized at an incredible pace. The Chicago based Swift, Armour, Morris, and Hammond meat packing companies controlled over 90% of the meat business in Chicago and were rapidly expanding their sales worldwide. With the introduction of mechanical refrigeration in 1881, they were ready to expand their market worldwide. As the US meat market expanded, so too did the calls for government inspection. Only it came from the most unlikely of places, the local meat packers and cattle ranchers. Because of the reduced costs to produce meat, the Chicago slaughterhouses were driving down the price of cattle the ranchers were receiving and charging less for the meat they were selling than local slaughterhouses could sell it. In order to stay in business, the local slaughterhouses and the cattle raisers colluded in spreading rumors that the Chicago meat packers were processing diseased cattle in horrific slaughterhouses.


In other periods of American history, these rumors would have died a quiet death but the Industrial Revolution, massive immigration and a growing acceptance of socialism had combined to create what is commonly called the Progressive Movement that sought reforms to the brutal working conditions, child labor practices, urban overcrowding and governmental corruption by the use of more government that ultimately unleashed a tidal wave of social changes in the US. These changes were about to begin radically altering the US republic and slowly turn it into a corporatist state as these cattlemen and local meat packers would eventually discover. Soon magazines and newspapers from around the nation joined with those cattlemen and meat packers in calling for federal inspection.

So with a groundswell of public support, the Bureau of Animal Industry Act was signed in 1884 creating the USDA’s Bureau of Animal Industry which was charged with preventing diseased animals from being used as food. Soon after this law was passed, the price of beef dropped leaving the Midwestern cattlemen to believe that the Chicago meatpackers were colluding with some powerful cattlemen to drop the price of cattle. Accordingly, state and federal antitrust legislation was demanded as a solution to this problem. This relationship between meat inspection and antitrust legislation soon caused two Bills to be passed by Congress; the Meat Inspection Act of 1891 that required inspection and certification of animals to be exported live or as meat and the Sherman Anti-Trust Act which prohibited any contract, trust, or conspiracy in restraint of interstate or foreign trade. The Sherman Anti-Trust Act was pushed by Midwest farm groups with the intention of breaking up the Chicago stockyards “monopoly.” The 1906 Meat Inspection Act and its sibling, the Pure Food and Drug Act completed the final federal takeover of the American food and drug supply.


Following soon after the Civil War, the Industrial Revolution turned the American economy on its head as productivity increased exponentially as America transitioned from agriculture to industrialization; this modernization especially affected the meat packing trade. As much as the smaller meat packers and cattle producers blamed the Chicago packers, or Beef trust, for underhanded tactics causing the falling beef prices and shifting market share, the real culprit was the irreversible effects of new technology; economies of scale in production, marketing, and shipment; and falling transportation costs. The years from 1870 until 1900 became known as “The Great Deflation” and were a boon for the American consumer as prices nearly halved, but it also meant that manufacturers and producers were paid less for their wares. The larger corporations had the economics of scale to compensate for the loss in revenue whereas the smaller producers did not. This shut down many small producers, encouraged the growth of the larger corporations and the creation of the “Robber Barons” of the Guided Age. With no other direction to turn, the farmers and small businesses turned to the government for help causing them to support the Meat Inspection Acts and the Sherman Anti-Trust Act.

Indeed, close examination of congressional debate and hearings over the Sherman Act emphasized the protection of small businesses and farmers, who were being ‘crushed’ by the new industrial methods. Senator James George of Mississippi, a leading proponent of antitrust, commented on the changes in the economy during Senate debate: “It is a sad thought to the philanthropist that the present system of production and of exchange is having that tendency which is sure at some not very distant day to crush out all small men, all small capitalists, all small enterprises”.

After the passage of the Meat Inspection Act of 1891 and the Sherman Trust Act, the prices of cattle rose until it peaked in 1900. But as in the previous decades, when the price of cattle declined, the cry of “monopoly” by the Chicago Meatpackers rose. This led to investigations into the meat packers’ practices in 1902 and another round of government intervention in 1906 as Upton Sinclair’s muckraking novel, “The Jungle,” (read here) focused on condition in the Chicago Stockyards. The novel, which even Sinclair admitted was not based on personal investigation or even many facts was actually a novel written to ignite a socialist movement in America not ignite a firestorm of protest and boycotting of refrigerated meats. His graphic descriptions of diseased animals, rats routinely ground into sausage along with other meats and men falling into rendering vats to be turned into Durham’s Pure Leaf Lard nauseated the American public almost overnight. The demand for tinned and frozen meat almost dropped in half and Europe was moving for a complete embargo of US beef.

Seeing the new act as what it was, the large meatpackers began to support it. This was not because they turned over a new leaf or became socially conscious but rather understood the law would allay fears fanned by “The Jungle,” allow the big meatpackers to supply the experts needed to write the act thus putting them into a better position, begin to eliminate competition as smaller companies could not afford the inspections and new regulations and put a newly laundered government stamp of approval on their products, so the major meatpackers strongly endorsed the proposed act.


With the help of the major meatpackers, the 1906 Meat Inspection Act passed, but written into the bill was the caveat that the taxpayers would foot the $3 million tab for the inspections. The Bureau of Animal Industry Act of 1884, the Meat Inspection Acts of 1890 and 1906 along with Sherman Anti-Trust Act were not passed out of honest need but rather political pressure applied to Congress by special interest groups. These acts represented a significant break from what had previously been considered an appropriate role for the federal government as they deliberately expanded the role of the US Government’s role in the economy. This reinforces the argument by D. C. North writing in “Structure and Performance: The Task of Economic History”  that from this point forward, the government worked with certain people and organizations to determine who the winners and losers were going to be. This also represented the move to form incestuous relationships with large corporations in areas other than transportation and banking that has only deepened since.

In the end, Americans got a new federal meat inspection law. The big packers got the taxpayers to pick up the entire $3 million price tag for its implementation.

“When Thomas Jefferson was president of the United States, almost 90% of the population was involved in agriculture. Everyone drank raw milk and the issues regarding health freedom and food sovereignty we face today were practically unheard of back in the days before the industrial revolution. As we look at the issues of food security in the 21st century, where less than 1% of our population controls what the rest of us eat, it is good to reflect back on our founding fathers’ desire to produce their own food.” — Unquote, Health Impact News, 2011