The Farmer's Benevolent Trust: Law and Agricultural Cooperation in Industrial America, 1865-1945

The Farmer’s Benevolent Trust

The Farmer’s Benevolent Trust

Law and Agricultural Cooperation in Industrial America, 1865–1945

Victoria Saker Woeste

The University of North Carolina Press

Chapel Hill and London

© 1998 The University of North Carolina Press

All rights reserved

Manufactured in the United States of America

The paper in this book meets the guidelines for permanence and durability

of the Committee on Production Guidelines for Book Longevity of the

Council on Library Resources.

Library of Congress Cataloging-in-Publication Data

Woeste, Victoria Saker.

The farmer’s benevolent trust: law and agricultural cooperation in

industrial America, 1865–1945 / Victoria Saker Woeste.

   p. cm.—(Studies in legal history)

Includes bibliographical references and index.

ISBN 0-8078-2421-6 (cloth: alk. paper).—

ISBN 0-8078-4731-3 (pbk.: alk. paper)

1. Agriculture, Cooperative—Law and legislation—United States—History. 2. Raisin industry—Law and legislation—California—History. 3. California Associated Raisin Company. I. Title. II. Series.

KF1715.W64 1998

346.73′0668—dc21                                    97-32599

CIP

02 01 00 99 98 5 4 3 2 1

THIS BOOK WAS DIGITALLY PRINTED.

For Keith and Helen

The welfare of this whole community is so bound up in the prosperity of the raisin business, and the progress of that business is so dependent on organized and more or less public action, that raisin affairs have always been treated, and properly treated, as public affairs. . . . The raisin industry, in this community, can not be treated, and never has been treated, as business in that narrowly private sense.

—CHESTER H. ROWELL, EDITOR, FRESNO REPUBLICAN, 1909

Contents

Acknowledgments

Introduction

PART ONE: Cooperation and Agriculture in American Culture, 1865–1910

1 The Farm Problem

2 From Agribusiness to Family Farms

PART TWO: The Legal Status of Cooperatives, 1865–1914

3 Voluntary Associations or Corporate Combinations?

4 A Growers’ Trust

5 Cooperatives and Federal Law

PART THREE: The Benevolent Trust in Law and Policy, 1912–1928

6 A Ruthless Trust Monopoly

7 Busting the Raisin Trust?

8 Decline of the Benevolent Trust

PART FOUR: Cooperation in the Industrial Economy, 1920–1945

9 Associationalism and Regulation

10 From Administered Markets to Public Monopoly

Conclusion

Appendix. A Statistical Profile of Small Farms in California, 1850–1940

Notes

Bibliography

Index

Illustrations, Maps, and Figures

Sunkist advertisement, Ladies’ Home Journal, February 1919 29

An early Fresno raisin-packing plant, ca. 1890 49

Raisins drying in the Sun, ca. 1900 50

Raisins drying in sweat boxes, 1940 51

Armenian immigrants harvesting wine grapes, ca. 1885 54

Formal portrait of M. Theo Kearney, 1903 80

Meeting of the California Raisin Growers Association, 1900 85

Kearney riding in chauffeur-driven limousine, Paris, 1904 86

James Madison and Wylie M. Giffen in the CARC offices, 1914 119

James Madison with Sun-Maid girls, 1916 121

Early CARC advertisement for Sun-Maid Raisins, December 1915 122

CARC advertisement, Ladies’ Home Journal, October 1917 123

California Associated Raisin Company brokers and salesmen, 1916 124

Women workers packing raisins in CARC plant, 1917 133

Growers signing contracts in CARC offices, 1917 134

Aerial view of Sun-Maid plant, Fresno, 1936 136

MAPS

1. California agricultural production regions, 1909 26

2. Fresno County, California, ca. 1920 46

3. Agricultural colonies in Fresno County, ca. 1875 47

4. Sun-Maid plants, receiving stations, and unit divisions, 1923 170

FIGURES

A.1. Farm Size in Fruit-Growing and Nonfruit-Growing Counties in California, 1910 248

A.2. Farm Size in Fruit-Growing and Nonfruit-Growing Counties in California, 1920 249

A.3. Farm Size in Fruit-Growing and Nonfruit-Growing Counties in California, 1930 250

A.4. Farm Size in Fruit-Growing and Nonfruit-Growing Counties in California, 1940 251

Tables

1.1. California Raisin Production, in Tons, 1884–1898 31

2.1. Average and Median Farm Size in California, 1860–1940 40

2.2. Farm Size in Five Fruit-Growing Counties, 1900 and 1920 52

2.3. Proportion of Armenians in the Populations of Four Raisin-Growing Counties, 1900–1920 56

2.4. Armenian and Total Populations in Raisin Industry Towns, 1918–1920 57

4.1. California Raisin Production, in Tons, 1899–1913 83

6.1. Trustees of the California Associated Raisin Company and Their Occupations, 1912–1918 114

6.2. Financial Condition of the California Associated Raisin Company, 1914–1920 125

6.3. Average Retail Prices of Raisins in the United States, 1915–1928 126

6.4. The California Raisin Crop, the CARC’s Share of the Raisin Crop, and Prices Paid to Growers, 1912–1920 128

7.1. CARC Prices to Growers and Wholesalers for Muscat Raisins, in Cents per Pound, 1914–1920 146

8.1. Sun-Maid’s Share of the California Raisin Crop, in Tons, 1921–1929 167

8.2. Sun-Maid’s Prices to Growers, in Cents per Pound, 1920–1929 168

8.3. Armenian Growers Withdrawing from Sun-Maid, by County, 1924 178

A.1. Numbers of Farms in California, by Size (in Acres), 1860–1940 240

A.2. Top Fruit-Producing Counties in California and Value of Crops Produced, in Dollars, 1910–1940 241

A.3. Top Field-Crop-Producing Counties in California and Value of Crops Produced, in Dollars, 1910–1940 242

A.4. Farm Size in Four California Fruit-Growing Counties, 1900–1940 244

A.5. Correlations between Farm Size (in Acres) and Value of Fruit Crop Production in California Counties, 1910–1940 246

A.6. Correlations between Farm Size (in Acres) and Value of Field Crop Production in California Counties, 1910–1940 247

A.7. Correlations between Total Number of Farms and Fruit and Field Crop Production among All California Counties, 1910–1940 252

A.8. Operators of Farms in California, 1910–1940 252

Acknowledgments

I take great pleasure in performing the author’s ritual declaration of intellectual and personal debts.

The American Bar Foundation in Chicago, where I have the good fortune to work, has provided me with generous support and a convivial environment in which to write. Bryant Garth, director of the ABF, has encouraged my interests and projects, supplied wise insights into the academic world, and supported my career in important ways. My ABF colleagues have created an academic community that is without peer; I look forward to resuming my participation in the lively conversations at bagel time. I especially thank Carol Nielsen and Roz Caldwell of the ABF support staff for their efficiency and dedication.

I would be remiss if I did not acknowledge the members of my dissertation committee who did so much to shape the book’s eventual direction. The topic was originally the idea of Morton Rothstein; his continued friendship and support over the years keep me in his debt. Jim Gregory and Martin Shapiro raised questions that I am still thinking about years later. My adviser, Harry Scheiber, has supplied advice, criticism, and mentoring over the years; I am proud to count myself among his students.

The manuscript began the arduous process of becoming a book under the steady guidance of Thomas Green, co-editor of the Studies in Legal History Series. Very early on Tom expressed interest in publishing my book and waited patiently as I thought through the conceptual and historical issues he challenged me to address. When Dirk Hartog joined the editorial team, he spent hours talking with me about the book’s possibilities and shepherded the manuscript through formal review. Comments from the outside reviewer, Dan Rodgers, helped me to sharpen the focus of the first part of the book. Lewis Bateman of the University of North Carolina Press has been unstinting in his enthusiasm for the book; I have benefited from his many years of editorial experience and his vantage on the profession.

I imposed on many friends and colleagues to read chapter and manuscript drafts. My thanks to Ann Fidler, David Hounshell, Laura Kalman, David Morrison, Janice Okoomian, John Sayer, Art Stinchcombe, Christopher Tomlins, and Barbara Leibhardt Wester for their close readings and vital help. I wish as well to acknowledge the contribution of participants at seminars where I have presented parts of the book: the Five College Social History Seminar at Smith College; the Boston University Law School Legal History Seminar; the Legal History Workshop sponsored by the Center for Comparative Legal History at the University of Chicago; the Law, Deviance, and Society Research Colloquium of the Department of Sociology, University of Wisconsin, Madison; and the Economic History Workshop at Northwestern University.

In addition to the ABF, I have benefited from financial assistance supplied by the University of California, the Business History Conference, and the Agricultural Cooperative Section of the U.S. Department of Agriculture, which provided the grant that supported the dissertation.

Research was greatly assisted by the staffs at the National Archives in Washington, D.C.; Waltham, Massachusetts; San Bruno, California; Chicago, Illinois; and the Census Microfilm Rental Program in Annapolis Junction, Maryland. The research librarians at the Bancroft Library at the University of California at Berkeley put their legendary expertise at my disposal and promptly tracked down obscure documents. The archivists at the Fresno Historical Society made my visits there productive and responded efficiently to phone and mail requests. Edward Ayers answered my queries about the ICPSR electronic census files, and John Manley smoothly transferred the large data sets for me to work with. Heartfelt thanks go to Jennifer Culbert, Benjamin Forest, Llezlie Green, Sandy Pittman, Amy Toro, and Samuel Weinstein; their help was vital in the final stages. Caroline Goddard, my research assistant, chased down many California sources from Chicago and performed the particularly tedious task of reading manuscript census schedules on microfilm.

Sun-Maid’s association with this book should be clarified at the outset. When I began my research in 1988, the cooperative’s secretary, Gary Marshburn, gave me open and unrestricted access to all extant records. In 1993, I asked to borrow photographs from the cooperative’s impressive collection, but by then the attitude of Sun-Maid officials had changed. My published articles had brought to light the incidents of violence associated with early Sun-Maid membership campaigns, and Sun-Maid’s president, Barry Kriebel, was concerned about the impact of these publications on the cooperative’s reputation and sales. Kriebel made permission to use photographs and other Sun-Maid art contingent on the publication in this book of a foreword written by him. Naturally, neither the Press nor I could agree to such a condition, and my working relationship with Sun-Maid ended at that time.

I am particularly indebted to the friends and teachers who have made a difference in my life. Dave Farrer was present literally from the moment I stepped off the plane to begin graduate school at Berkeley. In many ways he is family to me. Tekla Harms, James Hughes, and Debra Barbezat made life as a beginning assistant professor not only bearable but fun. In Chicago, I discovered again how rich in talent and generosity the academic community is when Carol Heimer and Wendy Espeland befriended me. Anita and Bob Rieder helped make Chicago home with their gifts of music and hospitality. William and Barbara Wester have been constant friends and companions even when careers and miles separated us. To Barbara, my graduate school buddy, I owe more than I can detail here. Let it suffice to say she wins the prize for reading the most drafts of the manuscript. Our long and frequent conversations about history, the profession, and publishing have been an essential part of my intellectual formation; her patience and enthusiasm renewed me when mine flagged. My teachers at the University of Virginia bear no responsibility for my choice to become a historian, but I know that without their example my life would have taken a different course. Robert Rutland, Martin Havran, and especially Charles McCurdy have shaped my life and career through their impeccable commitments to teaching and research.

Debts to family can never be completely discharged. The interest and encouragement of all my in-laws have bolstered me throughout my career. My father-in-law, John T. Woeste, steered me toward the USDA grant and to contacts in the agricultural extension system.

My parents, Patricia and Theodore Saker, and my family deserve special thanks for their love and support over the years. I have known for a long time that my intellectual training began in my parents’ home, where a vast library of history books and biographies and my father’s ravenous appetite for daily newspapers taught me the importance of keeping up with one’s reading. I have my sisters and brothers to thank for early lessons in cooperation. They and their spouses cheered me on as the finish drew near. None of my grandparents lived to see me complete graduate school, but their belief in the power of education has remained with me.

I dedicate this book to my husband, Keith, and our daughter, Helen. Keith’s relationship with this work has been nearly as intimate as my own; he not only read everything I wrote but also provided insight into horticulture and methodology. It is a tremendous advantage to live with one’s statistics consultant, and I am sure I abused the privilege. Helen is old enough to register objections to the impact of my work schedule on her daily life and young enough to grant prompt and complete forgiveness. I am grateful to both of them for their forbearance and for daily reminders of life’s larger purposes.

Earlier versions of parts of this book have been previously published as articles in the Law and History Review 10 (Spring 1992), 93–129, and Audacity 2 (Summer 1994), 48–61, and are adapted here with the permission of the copyright holders.

The Farmer’s Benevolent Trust

Introduction

When co-operation becomes general, there will be no great private fortunes, no involuntary poverty, no international trade rivalry, and, therefore, no war. Co-operation will turn the economic and social interests of the world into the channels of peace and good-will.

—Sun-Maid Herald, 1918

This book is about the struggle of farmers to adapt to industrialization. It is a story that has never been told before, though that is not its chief appeal. Rather, it is significant because it revisits familiar historical issues in an unexpected context. This is the story of how farmers combined the traditional ideology of cooperation with the economic and legal powers of the business corporation, used this new creation to organize their industries and redefine their relationship to the market, and in the process simultaneously exploited and undermined the myth of the Jeffersonian agrarian farmer. Told chiefly through a chronicle of the producers in California’s raisin industry and their influence on national law and administrative policy, this story reveals ironic, even paradoxical dimensions of the changes that restructured the U.S. economy and law between 1865 and 1945.

I became interested in issues associated with agriculture’s relationship to the state during my undergraduate days at the University of Virginia. At Mr. Jefferson’s university, courses in American legal history and American studies introduced me to the clash between the enduring image of the yeoman agrarian and the shifting economic and regulatory contexts of the late nineteenth and early twentieth centuries. To study industrialization and its impact on American law and society using industry as a conceptual framework, it seemed to me, was to take the straightforward path. And that approach dominated the economic and legal history literature, for entirely understandable reasons. Reading J. Willard Hurst and Morton Horwitz taught me that the rise of the national market and the transformation of American law during the nineteenth century came chiefly at the expense of nonindustrial economic activities and nonurban land uses. Developments such as the railroad and the transportation revolution, the rise of urban manufacturing centers and the labor movement, and the courts’ willingness to endorse the dedication of property to its most valuable economic uses all were valued for their contributions to urban society, not balanced against their cost to rural society.¹ Studying agriculture’s adaptation to the new economy, it seemed to me, presented the opportunity to explore the relationship between industrialization and legal change from the perspective of the sector industrialization supposedly left behind. By focusing on the period before World War II, I could treat agriculture’s economic transformation during a time when contemporary observers and historians defined farming as nonindustrial.

Except for historians who specifically examined agriculture, scholars have long treated industrialism and agriculture as distinct. Certainly ample historical evidence suggests that agriculture’s gains between 1870 and 1945 were sporadic. The agricultural sector began a steady decline after industrialization quickened its pace after the Civil War, a decline measured by population loss, a decrease in rural purchasing power relative to the price of retail goods, and the gradual disappearance of that most hallowed of icons, the family farm. Early twentieth-century magazines and newspapers sounded a drumbeat warning that farmers were losing ground, literally and figuratively, as urbanization transformed American society. Agricultural historians have been centrally concerned with understanding the reasons for these developments. But with few exceptions, they have paid little attention to agriculture’s relationship to and impact on law and the pre–New Deal administrative state.² The history of the cooperative movement suggests that the elements of what we recognize as modern American agriculture—large-scale corporate ownership of farmland, government price supports, and marketing quotas—were rooted in legal issues and controversies that antedate the turn of the twentieth century.

The legal history of agriculture may seem like a mere extension of the work of J. Willard Hurst, Harry Scheiber, Lawrence Friedman, and the Wisconsin school of legal history. This project certainly began as such. The Wisconsin school essentially created the legal history of economic change. Hurst’s study of the lumber industry in Wisconsin stands as the cornerstone of this new approach to legal history. In calling attention to the ways in which courts and legislatures made and remade law in dynamic interaction with the economic enterprise of logging, he shifted the methodology—as well as the conceptual framework—of the field from the doctrinal vagaries of U.S. Supreme Court decisions to the things that more immediately constitute the sociolegal order of everyday life. The way people dynamically deployed law to organize their polities and secure their commercial transactions, as well as the way the legal system actively promoted the release of creative entrepreneurial energy of the American people, Hurst argued, shaped the course of the nation in ways every bit as fundamental as Supreme Court decisions.³ It was Morton Rothstein, the longtime agricultural historian at the University of Wisconsin, who suggested to me that it might be interesting for a legal historian to look at marketing cooperatives; my first morning’s research in the law library more than confirmed his supposition. I discovered that the cooperative movement generally and the California organizations in particular played essential, heretofore unacknowledged roles in shaping some of the fundamental constitutional and regulatory issues of the Progressive Era. Telling the story of the raisin growers from the vantage of the irony and paradox created by their use of law became the goal of this book.

To write about historical actors and their use of law invites association with the functionalist/pluralist mode of history most often linked to the Progressive historians Charles Beard, Richard Hofstadter, and Hurst himself. Hurst in particular has been roundly criticized for arguing that resort to the law was an unproblematic extension of the democratic system, the implication being that anyone, regardless of personal status, could claim access to the law and its promise of economic and social advancement.⁴ Not surprisingly, this criticism came during the 1970s and beyond from social historians of law, whose interests in women, racial and ethnic minorities, and such economically disadvantaged groups as labor led them to less sanguine conclusions about law’s capacity for achieving social change.⁵ Hurst’s thesis, we should remember, was not that American law worked to the advantage of every marginalized individual or group but rather that its capacity for promoting economic growth prevented vested interests from retarding the development of society.⁶ What limits the relevance of this thesis to the social history of law is Hurst’s relative disengagement from the specific social contexts within which individuals and government interacted. The release of energy paradigm does not recognize the restraints that law imposes on those who seek to use it.

Many historians have argued that when women, African Americans, Native Americans, or immigrants used the courts to defend their rights, the results were mixed. Legal victories on specific claims often had fairly short shelf lives, with implications that participants could not anticipate.⁷ For example, when courts awarded Chinese aliens due process rights in deportation proceedings, the administrative state responded with even more restrictive policies. The political priority of keeping out undesirable aliens withstood the sustained assault the Chinese mounted in the courts. And when Native Americans sought to obtain enforcement of their rights to fish, hunt, and gather at their traditional places, rights that had been ostensibly reserved to them by federal treaty and on occasion vindicated by the federal courts, the states redefined those rights to be consistent with the interests of white property owners. Individuals and groups used the law to pursue specific goals, but they did not always attain those goals in their imagined form, and even when they did the legal system often responded in ways that confounded their victories. Legal structures can be and were used to resubordinate those seeking to attack power relationships in society that law held in place. In short, the use of law often led to unpredictable outcomes, characterized by neither the democratic access of Hurst’s dynamic law nor the entirely repressive hegemonic law of his critics.⁸

The history of the cooperative movement supplies a case in point of this idea. Cooperation embodied a series of puzzling incongruities. It combined the ideologies of self-help and agrarian self-sufficiency, even as it embraced the trend toward combination and consolidation. The movement borrowed from corporations and labor unions alike, yet it managed to evade the public enmity heaped on trusts and ultimately to avoid the legal pitfalls that courts carved out for unions. The movement proclaimed the unity of interests among farmers and the importance of agricultural solidarity, yet it resorted to zealotry and violence to reinforce its economic combinations. The movement was born out of farmers’ protests against monopolies and trusts, yet it staked its own existence on a privileged use of monopoly and the trust. The movement invoked the myth of Jeffersonian agrarianism, even as it demonstrated the incongruity of that myth in an industrial economy. In short, cooperation was a movement of contradiction’s. While cooperations traditional image kept it at the forefront of official agricultural policy for decades, the changes that farmers made in order to apply cooperation to the industrial market undermined the movement’s claim to the legal privileges that farmers so doggedly sought.

The raisin growers learned this lesson the hard way. The extraordinary legislative gains they won altered the legal status of cooperatives, but they also transformed the cooperative ideal itself and made recourse to that ideal—as justification for the granting of still more legal privileges—increasingly problematic over time. And as farmers discovered during the critical decade of the 1920s, it was impossible at once to make predictive claims about how cooperatives would work in the market and then make cooperatives perform according to those claims. Formal legal victories had less effect on what happened in the economy than cooperation’s proponents recognized. As I conclude, the cooperative movement succeeded in challenging the legal and social constraints that bound its development, but it could not change the underlying dynamics of an industrial economy. Ultimately, the downfall of the California Associated Raisin Company (CARC)—now known as the Sun-Maid Raisin Growers—occurred because law restrained cooperatives even as it endowed them with freedoms it did not grant to other entrepreneurs. Because cooperation failed to live up to its promise of saving agriculture and because the legal powers cooperatives attained were unequal to that task, agriculture’s fate ended up more tightly linked to the state after the Great Depression and farmers no less subordinate to the law and the market than they had been before.⁹

This book tests this revised model of legal functionalism by examining the cooperative movement’s intersection with three related areas of regulatory law.¹⁰ Antitrust, corporation, and equal protection law furnished the central legal issues the cooperative movement faced between 1865 and 1945. During this period, cooperatives sought to do for farmers what labor unions were attempting to do for wage workers: provide the economic and organizational benefits of collective bargaining to individuals otherwise left on their own.¹¹ To bring farmers more profit for what they produced, cooperatives used pricefixing, monopoly, and anticompetitive trading to dislodge the middlemen, thus putting farmers smack in the middle of the burning legal and economic issues of their day. Yet farmers’ involvement in these issues and the historical significance of their contribution to regulatory culture have been overlooked. Economic and legal historians studying antitrust have concerned themselves with defining restraint of trade, understanding the web of legal rules governing market behavior after the Sherman Act of 1890, and explaining how the system of dual federalism created regulatory vacuums during the Progressive Era.¹² Because the proposal to exempt farmers from the Sherman Act failed to make it out of committee, it has been easy to conclude that farmers had little to say about federal antitrust law or enforcement. In fact, they said plenty, but they said it in arenas on the periphery of regulatory action after 1900. While the nation’s businesses and consumers looked to Congress to set policy on the permissible degree of combination and monopoly in the national economy, agriculture was only partly affected by national legal and political developments during this time. Most of the antitrust and corporation law controversies involving farmers’ organizations took place at the state level. Consequently, the antitrust conflicts generated by the cooperative movement continued to enliven state antitrust enforcement long after similar industrial conflicts had moved to the federal arena. Federalism thus provided an essential, if at times convoluted, regulatory context for agriculture and cooperatives.¹³ The formal distinction between state and federal authority so prominent in Supreme Court jurisprudence during this era did not preclude farmers from conducting lively, ongoing experiments with the rules governing market behavior—or from pushing beyond those rules to see how far they could go.

Farmers pushed especially hard when it came to employing the business corporation to achieve the purposes of cooperation. Again, the legal and constitutional tensions of federalism underlay farmers’ struggle with the question of the legal form of their enterprise. Legal historians interested in the use of the corporate form as a means of organizing enterprise and promoting the accumulation of capital have looked closely at state laws creating corporations and governing their powers. As historians have shown, states engaged in a virtual bidding war at the turn of the century, competing to attract corporations by offering tax breaks, subsidies, and other public benefits.¹⁴ This history is important for understanding both the lack of antitrust enforcement at the state level and the pattern of corporate domiciling after 1900. Because this story has focused on industrial manufacturers and their strategic legal choices, however, it reinforces the general impression that the corporation was a more potent economic weapon in the hands of urban industrialists and had little relevance for the unsophisticated entrepreneurs on the farms. Hurst’s emphasis on legal forms and their availability to individuals should teach us to be skeptical of such conclusions. When farmers created corporate cooperatives to reorganize their industries and redefine their relationship to the market, they were not merely copying the strategies and organizational innovations of big business.¹⁵ Rather, they were remaking the corporation so it would be more useful to the agricultural sector. The enduring appeal of the Jeffersonian image and the continuing connection in the public’s mind between national prosperity and a thriving agriculture played directly into farmers’ hands. Thus farmers could draw on the corporation, the trust, and the labor union as institutional models and descriptive metaphors, while seeming to maintain a dignified distance from the specter of conspiracy, collusion, and corruption that these institutions evoked in the public mind.

During the period from 1890 to 1930, most groups in the American economy sought antitrust exemptions. The courts generally refused to permit one class of entrepreneurs to enjoy privileges not granted to others, on the grounds that no constitutionally recognizable disadvantage lay with the favored class. Farmers, however, thought that they constituted a special class of entrepreneurs because their occupation required them to sacrifice personal gain for the nation’s good. They contended in state and federal courts that the cooperative constituted a distinct form of organization. They believed that they suffered from an impaired ability to compete in the industrial market, and they worked for decades to overturn a Supreme Court decision that insisted otherwise. The equal protection issues raised by farmers—whether farmers were a distinct class of entrepreneur, and if so whether they deserved special treatment at law—are not so different from those raised by organized labor, the women’s movement, or even the struggles of Native Americans or African Americans seeking their full rights under the Constitution, if only in the sense that farmers believed that they as a group bore a disproportionate burden of the costs of economic growth. By framing their response in legal terms and forms made legitimate by powerful interests, they staked a claim to the economic justice that eluded them in the market.¹⁶

Antitrust, corporate identity, and equal protection were all framed by broader institutional and intellectual developments that shaped legal change between 1870 and 1945. Because the cooperative movement espoused political and economic values that were consonant with Progressive Era Americans’ vision of themselves and their society, farmers succeeded in gaining legal recognition for their special status long before these other groups did. The result was that relatively early in the twentieth century farmers established the basis for a special constitutional status that translated directly into long-standing policies of governmental privileges, subsidies, and favoritism. I argue that the equal protection doctrine affected economic status and regulatory culture in ways that standard legal and constitutional histories have missed.

The Progressive Era administrative state and agriculture had an unsettled relationship. Secretaries of agriculture under Theodore Roosevelt, William Howard Taft, and Woodrow Wilson consistently promoted the goal of getting American farmers to produce more as the number of farmers decreased. At the same time, the advent of bureaus of marketing in both the U.S. Department of Agriculture and the states provided the administrative capacity for addressing farmers’ economic and legal complaints about the distribution system. Both administrators and agencies sang the praises of cooperation as the salvation of agriculture, but governments refrained from organizing cooperatives or supplying any other assistance that directly involved the state in mediating market relations. This result was driven less by party politics than by the contemporary constitutional and intellectual limitations on the government’s involvement in the economy. The 1920s produced a wave of federal and state laws establishing cooperation as the pillar of agricultural policy, and these laws were direct precursors of the expanded administrative regulation of agricultural production, prices, and marketing that came during the New Deal. Here I argue that rather than standing as an example of the failed associationalist movement of the 1920s, cooperation established a regulatory model that led directly to the New Deal’s vision of an orderly, centrally controlled agricultural economy.¹⁷

Recently, historians have begun to focus on the impact of ideology on legal discourse to sharpen and expand the Hurstian paradigm. By the 1980s, legal historians seeking to understand the impact and relevance of legal rules and doctrine on economic change had turned to the role of ideology and ideas, first to reveal the hidden fabric of the constitutional thought of important judges, then to explain the institutional and political contexts of organizations and movements.¹⁸ Ideology plays no less essential a part in the history of the cooperative movement.

The cooperative movement had its own distinctive ideological heritage, drawn from European socialism, experimental utopianism, and a burgeoning of worker-owned purchasing collectives following the experiment of the Rochdale weavers in England. Although I will not undertake much examination of the European and socialist experiences with cooperative ideology and practice in this book, I notice the implications of those roots for cooperatives struggling to adapt to market conditions after 1900. The radicalism of their European and socialist origins sat side by side with the increasingly conservative emphasis of the American cooperative movement. When the movement pursued changes in antitrust and corporation laws, it sought only to make farmers better equipped to deal with other agents in the market, not to transform the structures and processes that defined free and competitive bargaining in the industrial economy. In short, in this country, agricultural cooperation reinforced the ideological and political assumptions underlying corporate capitalism. Indeed, such a position was necessary for the movement to gain legal legitimacy.¹⁹

Although Americans never embraced the European movement’s more radical implications, the emphasis of cooperation on self-help meshed with widespread concerns about the impact on society of industrialization, the concentration of bargaining power, and the sheer bigness of big business. Cooperation represented an alternative to capitalism that did not force society to give up the benefits of capitalism, instead reinforcing the belief that people could, through self-help mechanisms, share fully in the fruits of industrialization. Cooperation suggested that an equitable capitalism was still possible after 1900, as long as people adhered to the organizational principles of Rochdale cooperatives. Indeed, its promoters boldly maintained that cooperation could end all economic war by taming competition and ensuring basic fairness.

The cooperative movement continued to make this appealing argument as it moved to legitimize collective marketing in agriculture. It offered the striking possibility that agriculture could solve its own problems without rocking the ship of industrialization. The innovative organizations that arose in the California fruit industries, which claimed to fulfill the cooperative vision of a producers’ collective while building airtight monopolies over supply and marketing, stabilized industrial horticulture and integrated California agriculture into the national economy. In the process, however, California growers rejected the Rochdale model and its emphasis on decentralized decision making and noncapital operations in favor of a more corporate being with the commercial and legal powers necessary for conducting trade in the national market.

Putting this model into practice necessarily transformed the cooperative ideal. Farmers’ success in obtaining legislative recognition of their new form of corporation pushed the movement toward conservative economic goals and away from the image of the agrarian farmer it purported to preserve. The cooperative movement’s reorganization of horticultural marketing provoked heated criticism from opponents in the distribution system and advocates of consumer interests. First, they argued that these cooperatives were too powerful to continue in business under the rules of free and fair competition; then, as the organizations cemented their monopolies over supply and marketing, these opponents contended that cooperatives were taking advantage of farmers rather than acting in their interests. How could it be reasonable, they demanded, for a farmers’ cooperative to control and fix prices for the entire nation? The president of the California Associated Raisin Company disarmingly turned aside these complaints in 1920: Call us a trust, if you will, but we’re a benevolent one.²⁰ In his view, the benevolent trust was neither an oxymoron nor a legal fiction but a real answer to the problems the new economy inflicted on farmers.

The very idea of the benevolent trust raised the question of whether a corporation with all the powers of Standard Oil could keep its promise to act on behalf of the farmers it represented, save consumers money, and improve the efficiency of marketing, all without unjustly enriching anyone. For the most part, Americans wanted to believe cooperation’s promise. Except for the private firms and distributors that lost business to the cooperatives, no one really wanted to believe that agricultural trusts posed a threat to American consumers. Even when the California cooperatives explicitly made monopoly the hallmark of their organizations, it took an extraordinary conjunction of circumstances to overcome cooperation’s exemption from federal antitrust prosecution. Only after World War I, when cooperatives appeared to have an inordinate impact on price, did the federal government decide that litigation was legally justified. The 1920 antitrust prosecution of the CARC—the first ever against a farmers’ organization—forced its officers to defend the economic and legal assumptions of the benevolent trust model of cooperation. But the threat to the cooperative’s existence and operations was ultimately fleeting. When Congress essentially mooted the raisin antitrust case with new legislation embodying the precepts of the new cooperative style, it was clear that cooperation had become an inseparable aspect of agricultural enterprise and of the intellectual and political foundations of agricultural policy.

This book accordingly has much to say to business and agricultural historians as well as legal scholars. The cooperative movement provides a discrete though interdisciplinary analytical framework through which to understand changes in the organization of agricultural business and its relationship to law and the larger market system. My case study, an extensive history of the raisin growers’ organization, follows the method of Alfred Chandler and other business historians who explore the impact of economic change on firms and industries. The case study’s contribution to the understanding of agriculture as a business enterprise is particularly relevant for business historians of the organizational school, who are evincing interest in a more interdisciplinary approach to the history of American business enterprise. Scholars in this vein have redeemed the business person from the traditional role of corporate villain.²¹ I attempt to do the same for the agents of agribusiness by revealing the dimensions of law and ideology in the cooperative organization of agricultural marketing.

The term agribusiness has been a shibboleth, and a pejorative one at that, for decades. Carey McWilliams invented the term in 1939 to describe California agriculture by the 1930s: factories in the field, dominated by large-scale intensive cultivation, utterly exploitative of human labor and the natural environment.²² The image of the California that greeted John Steinbeck’s Okie migrants has remained with historians of the state for the better part of a century. Walter Goldschmidt’s study of the relationship between agribusiness and large farms, though now somewhat discredited, influenced agricultural historians for the better part of two generations. When scholars such as Gerald Nash, Donald Pisani, and Cletus Daniel considered the historical record of California agriculture, they tended to characterize it in implicitly evolutionist terms: from small farms to large, from individual to corporate ownership, from diversified to specialized operations, from subsistence to commercialized agriculture. And they implicated the cooperative movement in this process, folding the organization and market behavior of the major California horticultural cooperatives into the general story of agribusiness. According to this view, cooperatives helped achieve and reinforced the changes in marketing, transportation, and technology that were themselves instrumental in the rise of commercial horticulture. As Sucheng Chan has put it, California has been a pioneer in organizing marketing cooperatives that control national and worldwide markets through the use of sophisticated ways to gather and relay market information and to adjust supplies instantaneously in response to fluctuations in demand in various places as the fresh produce is being moved across the country. Indeed, there seems to be little scholarly dispute that cooperatives arose in response to marketing inefficiencies over long distances, disparities in bargaining power between the growers and agents of the distribution system, and farmers’ firm conviction that they were being cheated out of a just share of the profits from their crops. Historians believe that California was the font of agribusiness and the cooperative movement simply another ingredient in its recipe.²³

More recently, some scholars have begun to reexamine this long-held understanding. New work on agricultural labor and on farm size sheds new light on the relationship between agriculture as an economic system and the individuals whose labor and capital contributed to that system. Sucheng Chan’s work on the Chinese in California between 1850 and 1920, for example, reveals that the corporate consolidation taking place in California agriculture did not eradicate the meaningful economic activities of even the most marginal groups in California society.²⁴ As I dug deeper into my research, I found myself wondering who belonged to the marketing cooperatives in California, what kind of farmers they were, and what their economic status was. As it turned out, it was not possible to answer all of these questions, but my study uncovers long overlooked information about the growers who toiled between migrant labor and corporate agribusiness.

What I found changes how we understand the history of California agriculture. The cooperative movement in California horticulture was built on the backbone of thousands of small farms, farms that became more, not less, numerous over time. The growers who owned these farms did not fit the profile of the typical California land baron. Most fruit growers were men and women of modest means, not absentee landlords holding cowed tenants and migrants in prolonged dependency. These small landholders were just as important to the industry’s prosperity—and to the cooperative movement—as the social and economic elites whose large holdings made them wealthy and powerful. Since farm size was not always a perfect indicator of class, race, or ethnicity, locating the center of power within the industries is not a matter of finding the largest, richest growers. Rather, it is a matter of understanding the relationship between a small group of large landowners and a very large group of small growers in the context of a sustained drive for industry-wide collective action.²⁵

The history of cooperation in the raisin industry directly contradicts the evolutionary story of the rise of agribusiness and, by implication, the role of law and policy in fostering the commercialization of agricultural enterprise. Instead of relentlessly marching toward agribusiness, the raisin industry relied on several different economic subsystems occupying the same space and time, related to each other but generating distinct socioeconomic cultures.²⁶ Small growers were essential players in the movement to organize cooperatives and to establish monopolies in the marketing of their commodities. Thus the presence of a widespread and growing cadre of small farmers between 1870 and 1940 makes all the difference in the story we can tell about the rise of cooperative marketing.

The story of cooperation in the raisin industry is not just one of farmers against distributors, of the rural world taking on the nonrural world. It is also a story about the social conflict that resulted when small independent growers refused to be dominated by industry leaders. During the Progressive Era, all the California horticultural industries were forming cooperatives, learning from and copying each other in the process. I chose to focus on the raisin growers because they were the most legally innovative and because, in the words of a present-day California cooperative official, Sun-Maid’s the one with the skeletons in its closet.²⁷ Opening that closet, as it turned out, pointed the way into the world of turn-of-the-century agricultural producers, a world defined in large measure by their relationships to their industry and the market, certainly, but no less fundamentally by their relationships to each other.

The presence of many small farm owners and operators in the raisin industry decisively affected the dynamics of cooperative organizing and the outcome of the CARC’s attempt to corner its market. Initially, many growers were shepherded into raisin industry cooperatives by the strong-willed, wealthy growers who made up the industry’s elite. Cooperative leaders liberally applied corporation law to the incipient law of cooperative organizations; they then took law into their own hands to hold cooperatives together against fierce opposition and the disparate interests of grower-members. The actions of the night riders who coerced growers into joining the CARC showed the lengths to which individuals were willing to go to ensure the cooperative’s success. Unchecked by local and federal authorities, the night riders victimized any grower, regardless of social status, farm size, or ethnicity, who dared to assert economic independence. The prevalence of Armenian Americans among the independent-minded added a racial dimension to the violence, but the mobs’ primary aim was forcible inclusion to cement the monopoly.²⁸ Neither violence nor formal law, or the two together, could preserve the benevolent trust in the face of unstable economic conditions whose causes lay beyond the acceptable bounds of regulation.²⁹

This book is a history of the cooperative movement that integrates its legal, social, and economic dimensions. It weaves together sources from economics, history, and law. It draws on archival research in the records of the Justice and Agriculture Departments in the National Archives, manuscript collections of people and firms in the raisin industry, and a host of agricultural newspapers and magazines, including the publications of the CARC and Sun-Maid. The research design is necessarily interdisciplinary. The politics of antitrust law, the reform currents of the Progressive Era, the intellectual debate over farming’s place in the new economy, the social and economic aspects of the post-World War I farm crisis, and the comprehensive alterations the Great Depression imposed on state and society alike all shaped the cooperative movement in significant ways. In turn, the cooperative movement exerted no small influence on these developments, helping to reframe the image of American agriculture throughout a period of unsettling and disturbing economic change. The California raisin industry furnished the exception that became the basis of the rule. The California Associated Raisin Company defined modern agricultural cooperation. The national political and legal responses to cooperation’s benevolent trust reformed the relationships among agriculture, the law, and the state in twentieth-century society.

This book encompasses four overlapping parts. The broad intellectual, political, and economic settings of the study are described in Part I. Chapter 1 defines the farm problem at the turn of the century as the problem of marketing agricultural commodities in a national economy, lays out the breadth and variety of cooperative practices in late nineteenth-century America, and traces the roots of the dominant mode of cooperation that emerged in California in the twentieth century. Chapter 2 describes the California context. It details the social and economic underpinnings of commercial horticulture and explains why California growers turned to the corporation as a way of bringing their distinctive approach to cooperation to fruition. I argue that small farms furnished the essential and lasting foundation of the horticultural economy, which had significant implications for the cooperative movement.

Part II sets out the legal and historical framework for the case study that follows in Part III. Chapter 3 analyzes the legal status of the cooperative in antitrust law at the state level. Until a legislative determination of cooperatives’ legal character could be made, the state courts treated them as illegal combinations engaged in restraint of trade. These rulings did not deter experimentation with cooperation’s legal form in the raisin industry, as Chapter 4 makes clear, but they did shape growers’ attitudes toward the maverick leader who flouted the law in creating the first industry-wide cooperative. The federal antitrust and equal protection issues raised by farmers’ cooperatives and the beginnings of a new federal policy are considered in Chapter 5.