What is DOCTRINE OF PARITY? What does DOCTRINE OF PARITY mean? DOCTRINE OF PARITY meaning - DOCTRINE OF PARITY definition - DOCTRINE OF PARITY explanation.
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The doctrine of parity was used to justify agricultural price controls in the United States beginning in the 1920s. It was the belief that farming should be as profitable as it was between 1909 and 1914, an era of high food prices and farm prosperity. The doctrine sought to restore the “terms of trade” enjoyed by farmers in those years. It was highly controversial, since critics argued it ignored changes in agricultural productivity and set an artificial standard.
The doctrine developed in the 1920s as food prices declined after the First World War. The first attempt at instituting the parity doctrine was the McNary-Haugen Bill, vetoed by President Calvin Coolidge in 1928. Farming prices decreased further during the Great Depression, leading to parity-seeking New Deal era legislation, such as the Agricultural Adjustment Act of 1933.
Political pressure to enforce parity declined after the 1940s and 50s as commodity prices rose. However, New Deal programs remained in place, and agricultural price regulations were still regularly introduced.
American farm commodity prices rose throughout the 19th century. Even when occasional declines and farmer complaints occurred, like in the mid-1880s, the federal government only intervened through tariffs, anti-trust laws, and small measures to spur demand. There was no conscious effort to bring prices to an “ideal” level. In the early 1910s, commodity prices rose even further, and by 1914, farm prices were at their highest level in a century. The prosperous 5-10 year period before 1914 is often referred to as the “Golden Age” of agriculture, and the relative price level of this time would set the standard for “parity.”
America’s involvement in the First World War in 1917 spurred the first large-scale federal intervention in the farm commodities market. Out of wartime necessity, the government allowed executive regulation of agricultural production and requisitioned food supplies. This wartime intervention, though not implemented with the intention of aiding farmers, would lay the foundation for later regulations. After the war, prices declined; 1921 saw a particularly sharp drop. During this period, the first organized farm lobbies were created.
As political pressure rose, the McNary-Haugen Bill was introduced in Congress in January 1924. The bill would control US agriculture prices by having the federal government purchase excess supply. A fund of $200 million would be created for such a purpose. The target prices would be computed monthly by the Bureau of Labor Statistics, and would be real-price equivalents of those in the 1905-1914 period. The bill passed Congress in 1928, but was vetoed by President Calvin Coolidge.
Despite the political pressure, 1924-1929 farm commodity prices were, on average, only 5 percent lower than in the 1909-1914 parity period. In 1929-1933, however, farm prices declined much further. Between 1919 and 1933, wholesale agricultural prices declined by 67 percent, with most of this drop occurring after 1929. In 1930 alone, farm commodity prices declined by 37 percent. The Hoover administration passed the Agricultural Marketing Act in 1929, which introduced limited supply controls, but the price decline continued.