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Although economists have long recognized that private cartels are difficult to sustain, they generally have been too sanguine in their assessment of the potential for government-built or assisted cartels. The coercive power of the state has seemed to be a natural remedy for forcing agreement and compliance with output reductions and individual quotas when no private consensus can be reached. This view, however' neglects the costs faced by politicians and bureaucrats when the industry is heterogeneous and there is disagreement over quota policies.(77) Yet, these are precisely the conditions under which government assistance is asserted to be most necessary. Under these circumstances, a government-sponsored cartel may be no more successful in achieving production restrictions than were private cartels. The advantage of government efforts, as federal agricultural programs make clear, is that there is a much longer menu of alternatives for raising prices, such as government purchases to enhance demand.
As noted in the beginning of the paper, agriculture is perhaps the most heavily regulated sector of the American economy, a process that largely began with the Agricultural Adjustment Act of 1933. Although the focus of that law was on production control and marketing restrictions, political opposition to output controls by various farm groups brought a shift in emphasis to demand enhancement with government acquisitions of "excess" stocks. Gradually in the 1930s, through the purchase of commodities by the Commodity Credit Corporation and other similar agencies and their distribution through relief, and later, through subsidized exports, food aid, and school lunch programs, the modern character of federal agricultural programs took shape. Government purchases were much more acceptable to influential farm groups than were production and shipping controls in the effort to raise farm prices and incomes. As a broad, generally unorganized group, taxpayers increasingly absorbed many of the costs of federal farm policy. |
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