The years after the Civil War brought hardship to Southern farmers as their economic mainstay, cotton, steadily dropped in price. In September 1877 farmers gathered in Lampasas County, Texas, to discuss their grievances. This gathering began the National Farmers' Alliance and Industrial Union, more commonly referred to as the Southern Farmers' Alliance. This organization eventually claimed a membership of almost three million, one of the largest protest organizations in American history.
The initial growth of the alliance in Texas was slow, and its membership rather inactive. To the state alliance convention in August 1883 only thirty of the almost 100 local alliances sent representatives. Alliance president W. L. Garvin appointed S. O. Daws a full-time, salaried lecturer and ordered him to revitalize the alliance. Daws accompanied his discussion of possible relief strategies with a protest ideology that blamed the agrarian crisis on "the capitalist [who] holds your confidence in one hand, while with the other he rifles your pocket." Daws's influence was considerable. More than 600 delegates attended the 1885 state alliance convention.
The economic strategies subsequently implemented were of two types. First, farmers looked at their plight in terms of the purchasing system, stressing the excessive prices on supplies. Second, they focused on the marketing system, stressing the falling price of cotton and the absorption of much of the profit of cotton production by middlemen.
The first attempt to address problems in the purchasing system was the trade-agreement strategy. Each county alliance appointed a committee to ask merchants for the lowest prices in return for a guarantee of the alliance members' cash business. Though trade agreements did marginally improve purchasing conditions for hundreds of alliance farmers, at least temporarily, they had major limitations. Indebted farmers, forced to buy goods on credit, could not participate in the cash terms of the trade agreements. Trade agreements were also vulnerable to violation. They stipulated a certain charge above wholesale, but farmers were suspicious of reported wholesale costs. Finally, the trade-agreement strategy suffered from wholesalers' hostility. A trade agreement with one merchant meant lost business to nearby merchants. Since most retail merchants were in debt to wholesalers, the latter had a stake in retail profits. When trade agreements began affecting those profits, wholesalers pressured merchants cooperating with the alliance to renege on the trade agreements by threatening delays in delivery of supplies or by refusing to extend credit for supply purchases.
Another economic strategy was alliance-owned cooperative stores, which reported annual sales ranging from $5,000 to $36,000. Many claimed to sell goods at 20 to 30 percent below regular retail price. However, the stores suffered from several problems. Not only did they face the hostility of wholesalers, but retailers often lowered prices temporarily below those of the cooperatives, hoping to draw away enough customers to close the stores. In addition, to obtain adequate capitalization, most of the cooperatives had to entice the farmer's investment with the promise of dividends. Dividend payments added to the cost of supplies, and consequently prices were not reduced as much as farmers had hoped.
Cooperative flour, cottonseed oil, and corn mills, as well as cotton gins, were also established. Though the importance of savings from these mills and gins, as well as from the trade agreement and cooperative stores, should not be considered trivial, these strategies did not directly address the problem of declining cotton prices. Nor did they help the poor farmer who did not have the ready cash to participate.
Consequently, some alliance farmers demanded political action to address their economic problems. Tensions between political insurgents and political conservatives within the alliance climaxed at the August 1886 alliance convention in Cleburne. The insurgents scored a major victory with the passage of a series of political demands. Several of these related to labor issues highlighted by the 1886 Great Southwest Strike by the Knights of Labor, governmental land policy, and railroad regulation. The most controversial demands, however, related to monetary reform. Believing that significant relief from declining crop prices required the expansion of the currency supply, alliance farmers demanded that the government immediately use silver in addition to gold as legal tender in order to ease the contracted currency supply. They argued, however, that significant relief required a more radical revamping of the existing monetary system than entailed by "free silver"-the establishment of a fiat currency system wherein the government would issue "greenbacks" based on a predetermined per capita circulation volume, rather than on an inflexible metallic standard.
Political conservatives within the alliance condemned the Cleburne demands and maneuvered to establish a rival alliance that would be strictly a business organization dedicated to economic self-help. Andrew Dunlap, a "strictly business" advocate, resigned from the alliance presidency. The chairman of the state executive committee, Charles William Macune, assumed the powers of president pro tem and called a special convention in January 1887. In his opening address to this convention, he proposed a central, statewide alliance exchange to coordinate the marketing of the cotton crop of the state membership and to act as a central purchasing house. He also called for the mobilization of the entire cotton belt under the alliance banner and set forth plans for a nationwide organizing effort. The "strictly business" advocates were pacified by the scope of his plans, and unity once more prevailed.
In its attack on the purchasing system, the alliance exchange attempted to bypass both retail and wholesale merchants. Purchasing was direct from the manufacturer whenever possible. Most importantly, a cooperative credit program was established as an alternative to the existing crop-lien credit system. Under crop-lien financing, the merchant advanced credit-not by lending money but by advancing supplies and goods in return for a lien on the growing crop. In addition to the interest, the rate of which ranged from 20 to 200 percent, the farmer was charged "time prices" on his purchases; the typical markup was at least 25 percent above the "cash price." The alliance credit program entailed no time prices, and the interest rate was only 1 percent a month from the date of supply shipment until the date of payment.
In its attack on the cotton-marketing system, the exchange plan instituted statewide bulking of cotton. Each county alliance bulked its members' cotton and sent bale samples to exchange headquarters in Dallas. There they were displayed in a sample room, where textile manufacturers examined them. Having eliminated the middlemen, alliance members received a larger proportion of the profit from cotton production and trade.
The enthusiasm for the exchange plan among farmers was evident in the dramatic growth of the alliance from 75,000 in early 1887 to 150,000 by the following year. But by May 1888 the exchange was in a serious financial struggle, and in 1889 creditors foreclosed. A significant decline in state membership ensued; active, dues-paying members dropped from an alleged high in early 1888 of 225,000–260,000 to 142,000 by 1889. Furthermore, a national organizing campaign had begun, and organizers had planned to export the Texas exchange's credit strategy to other states.
The crisis was abated momentarily by a boycott on jute bagging. Jute bagging, which held together cotton bales, dramatically jumped in price in 1888 because of a price-fixing agreement among eight American companies. Such alliance leaders as Texas state alliance president Evan Jones called for a boycott on jute bagging and the use of a newly developed cotton-bagging product. The boycott reduced the price of jute. Alliance leaders, however, continued the boycott because they wanted to kill any chance of a resurgence of the jute trust by promoting cotton bagging. But there was too much cotton and there were too many cotton mills for a cotton-bagging trust ever to form. Despite their efforts, the development and use of cotton bagging encountered a number of major obstacles, and the jute boycott faltered.
In 1889 a major redirection of alliance strategies was provided by Macune. In his presidential address to the national alliance convention in 1889, he argued that the root cause of the agricultural depression was an insufficient currency supply, thus echoing the analysis found earlier in the controversial Cleburne demands. A committee was appointed to formulate a solution to the currency supply problem. This committee, in which Macune played a major part, proposed the "subtreasury plan," which entailed a governmental commodity-loan program and later a land-loan program. Under this plan, federal warehouses would be established for storage of nonperishable crops to wait for higher crop prices, and farmers would be allowed to borrow up to 80 percent of the local market price on the products deposited. The annual interest rate on these loans would be 2 percent, with additional nominal charges for handling, storage, and insurance. The program would be funded with newly printed money until the volume of circulating currency reached fifty dollars per capita, a volume associated with the prosperous war years.
In Texas, a subtreasury educational campaign was begun. The Southern Mercury, the state alliance's newspaper, routinely included educational articles on the subtreasury. Scores of lecturers visited local alliances to explain the subtreasury. Grand alliance encampments were centered around the idea of the subtreasury. The shift toward political action was decisive. In Texas the alliance played a major role in the 1890 victory of gubernatorial nominee James Stephen Hogg, a reform Democrat, who was a strong advocate of an intrastate Railroad Commission. However, neither Hogg nor the state Democratic party platform had supported the subtreasury plan. Delegates to the 1890 state alliance convention voted to make future support of the Democratic party contingent on its support of the subtreasury.
Some loyal Democrats in the alliance were alarmed and attempted to mobilize an anti-subtreasury faction. In March 1891 they issued their "Austin Manifesto," which claimed that the subtreasury plan was merely a scheme of third-partyites trying to undermine the Democratic party. The manifesto was signed by eleven alliance members, eight of whom were state legislators. It caused tempers to flare; one of its signers got in a fist fight in the corridors of the Capitol with a prominent subtreasuryite. A special alliance convention was called to discuss the manifesto, and a resolution denouncing it passed easily.
In May 1891 a third party became a reality with the establishment of the People's party, whose platform was identical to the national platform of the alliance. Democratic leaders began drawing battle lines. In October 1891 the Democratic Executive Committee of Dallas demanded the resignation of one of its members, an alliance subtreasuryite, W. R. Cole. The state Democratic Executive Committee followed suit with its ruling that subtreasury advocates could neither hold leadership positions in the Democratic party nor vote in Democratic primaries. This stand prompted Texas alliance leaders to begin campaigning for the People's party; the national alliance organization formally endorsed that party in February 1892.
Thereafter, the fate of the alliance was intricately linked with that of the People's party. The party's betrayal of alliance principles in 1896, in particular its abandonment of the subtreasury, was assailed by Texas alliance activists. However, by 1896 the alliance was a faint shadow of itself. Since the People's party had endorsed the alliance platform in 1891, most alliance members saw no further need to continue paying alliance dues and attending alliance meetings. Consequently, the monetary resources of the alliance were not sufficient to fight the People's party betrayal of its cherished principles.