From the end of the Civil War to the mid-1890s, increased production of wheat and cotton, two of the most important American crops, led to a precipitous drop in the price for these crops. Falling prices created a debt crisis for many farmers. Most American farmers were independent businessmen who borrowed money to pay for land, seed, and equipment. When their crops were harvested and sold, they repaid their debts with the proceeds. As prices fell, farmers increased production in an effort to cover their debts. This tactic led to a greater supply of farm produce in the marketplace and even lower prices. Unable to pay back loans, many farmers lost their property in foreclosures to the banks that held their mortgages and furnished them credit.

To make matters worse, farmers lived isolated lives. Spread out across vast acres of rural territory, farmers had few social and cultural diversions. As the farm economy declined, more and more of their children left the monotony of rural America behind and headed for cities in search of new opportunities and a better life.

Early efforts to organize farmers were motivated by a desire to counteract the isolation of rural life by creating new forms of social interaction and cultural engagement. In 1867, Oliver H. Kelly founded the Patrons of Husbandry to brighten the lonely existence of rural Americans through educational and social activities. Known as Grangers (from the French word for “granary”), the association grew rapidly in the early 1870s, especially in the Midwest and the South. Between 1872 and 1874, approximately fourteen thousand new Grange chapters were established.

Grangers also formed farm cooperatives to sell their crops at higher prices and pool their purchasing power to buy finished goods at wholesale prices. The Grangers’ interest in promoting the collective economic interests of farmers led to their increasing involvement in politics. Rather than forming a separate political party, Grangers endorsed candidates who favored their cause. Perhaps their most important objective was the regulation of shipping and grain storage prices. In many areas, individual railroads had monopolies on both of these services and, as a result, were able to charge farmers higher-than-usual rates to store and ship their crops. By electing sympathetic state legislators, Grangers managed to obtain regulations that placed a ceiling on the prices railroads and grain elevators could charge. The Supreme Court temporarily upheld these victories in Munn v. Illinois (1877). In 1886, however, in Wabash v. Illinois the Supreme Court reversed itself and struck down these state regulatory laws as hindering the free flow of interstate commerce.

Another apparent victory for regulation came in 1887 when Congress passed the Interstate Commerce Act, establishing the Interstate Commerce Commission (ICC) to regulate railroads. Although big businessmen could not prevent occasional government regulation, they managed to render it largely ineffective. In time, railroad advocates came to dominate the ICC and enforced the law in favor of the railway lines rather than the shippers. Implementation of the Sherman Antitrust Act also favored big business. From the standpoint of most late-nineteenth-century capitalists, national regulations often turned out to be more of a help than a hindrance.

By the late 1880s, the Grangers had abandoned electoral politics and once again devoted themselves strictly to social and cultural activities. A number of factors explain the Grangers’ return to their original mission. First, prices began to rise for some crops, particularly corn, relieving the economic pressure on midwestern farmers. Second, the passage of regulatory legislation in a number of states convinced some Grangers that their political goals had been achieved. Finally, a lack of marketing and business experience led to the collapse of many agricultural collectives.

The withdrawal of the Grangers from politics did not, however, signal the end of efforts by farmers to form organizations to advance their economic interests. While farmers in the midwestern corn belt experienced some political success and an economic upturn, farmers farther west in the Great Plains and in the Lower South fell more deeply into debt, as the price of wheat and cotton on the international market continued to drop. In both of these regions, farmers organized Farmers’ Alliances. In the 1880s, Milton George formed the Northwestern Farmers’ Alliance. At the same time, Dr. Charles W. Macune organized the much larger Southern Farmers’ Alliance. Southern black farmers, excluded from the Southern Farmers’ Alliance, created a parallel Colored Farmers’ Alliance. The Alliances formed a network of recruiters to sign up new members. No recruiter was more effective than Mary Elizabeth Lease, who excited farm audiences with her forceful and colorful rhetoric, delivering 160 speeches in the summer of 1890 alone. The Southern Farmers’ Alliance advocated a sophisticated plan to solve the farmers’ problem of mounting debt. Macune devised a proposal for a subtreasury system. Under this plan, the federal government would locate offices near warehouses in which farmers could store nonperishable commodities. In return, farmers would receive federal loans for 80 percent of the current market value of their produce. In theory, temporarily taking crops off the market would decrease supply and, assuming demand remained stable, lead to increased prices. Once prices rose, farmers would return to the warehouses, redeem their crops, sell them at the higher price, repay the government loan, and leave with a profit.

The first step toward creating a nationwide farmers’ organization came in 1889, when the Northwestern and Southern Farmers’ Alliances agreed to merge. Alliance leaders, including Lease, saw workers as fellow victims of industrialization, and they invited the Knights of Labor to join them. They also attempted to lower prevailing racial barriers by bringing the Colored Farmers’ Alliance into the coalition. The following year, the National Farmers’ Alliance and Industrial Union held its convention in Ocala, Florida. The group adopted resolutions endorsing the subtreasury system, as well as recommendations that would promote the economic welfare of farmers and extend political democracy to “the plain people.” These proposals included tariff reduction, government ownership of banks and railroads, and political reforms to extend democracy, such as direct election of U.S. senators.

Finally, the Alliance pressed the government to increase the money supply by expanding the amount of silver coinage in circulation. In the Alliance’s view, such a move would have two positive, and related, consequences. First, the resulting inflation would lead to higher prices for agricultural commodities, putting more money in farmers’ pockets. Second, the real value of farmers’ debts would decrease, since the debts were contracted in pre-inflation dollars and would be paid back with inflated currency. Naturally, the eastern bankers who supplied farmers with credit opposed such a policy. In fact, in 1873 Congress, under the leadership of Senator John Sherman, had halted the purchase of silver by the Treasury Department, a measure that helped reduce the money supply. Later, however, under the Sherman Silver Purchase Act (1890), the government resumed buying silver, but the act placed limits on its purchase and did not guarantee the creation of silver coinage by the Treasury. In the past, some members of the Alliance had favored expanding the money supply with greenbacks (paper money). However, to attract support from western silver miners, Alliance delegates emphasized the free and unlimited coinage of silver. Alliance supporters met with bitter disappointment, though, as neither the Republican nor the Democratic Party embraced their demands. Rebuffed, farmers took an independent course and became more directly involved in national politics through the formation of the Populist Party.