Posted on 11/29/2008 9:29:52 PM PST by neverdem
Michael Pollan, best known for his polemics against the food-industrial complex, has made a minor villain out of Earl Butz, Richard Nixon’s secretary of agriculture. Faced with a sharp spike in inflation, the Nixon White House sought to win the political allegiance of housewives by taking sweeping steps to lower agricultural prices. Butz slashed regulations and trade barriers while increasing subsidies. The result: Family farms closed down, huge agribusiness concerns expanded mightily, production soared, and domestic food prices fell dramatically. For Pollan, Butz’s machinations lie behind the current obesity epidemic and a broader coarsening of American life. But there is a very real sense in which Butz ended the specter of hunger in the United States. Apart from the subsidies, there is much to admire in his approach: His package of reforms delivered a better quality of life to millions of Americans.
Now, Richard Nixon is hardly a model for Republican domestic policy. His crude Keynesianism and his embrace of wage and price controls are rightly condemned by conservatives, not least because such recklessness helped set the stage for stagflation. But Earl Butz’s approach deserves another look.
We sometimes forget that strengthening the free market often requires policy activism. Standing pat has its place, but anti-market forces can turn the inaction of the other side to their advantage. This will become very clear in the first few months of an Obama White House. Aided by his shrewd enforcer, Rahm Emanuel, Obama looks set to reshape the American state in ways that will permanently ratchet up the size of government and the cost of living. And until the bill comes due, it is a safe bet that a majority of voters will cheer him on. For now, Republicans can only react to what Obama does. Over the longer term, the party needs to develop a strategy that, like Butz’s agricultural reforms, will have a significant impact on the quality of life of working-class and middle-class voters.
American workers are, as we all know, feeling anxious and vulnerable. And when we think of the political implications of this souring of the American mood, we tend to think, correctly, that it helps the Democrats. Barack Obama’s victory is not, as some self-described progressives dearly hope, a mandate for robust social democracy. Just as Bush did not win in 2000 and 2004 because of his supposed commitment to free markets, there’s no reason to believe that voters carefully evaluated Obama’s economic program and found it persuasive. Rather, Democrats won because recent developments have sharply reduced the number of Americans who are optimistic about their economic prospects. As the Pew Research Center has found over the years, economic optimists tend to be Republicans. That is, people who believe that they control their own economic fate, and that the future will likely be brighter than the past, tend to vote Republican by overwhelming margins. This is true among blue-collar workers as well as affluent professionals.
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The second part of your paragraph is clearly true. Regulations serve the interests of those with the ability to devote resources to their compliance. This is why big business tends not to really be ideologically conservative in the final analysis. They have the resources to game the regulatory system, while smaller competitors don't.
The first part of your paragraph, though, is a little off. "Family" farms make about as much sense in the year 2008 as "Family automobile manufacturers" or "family coal mines." For the most part, anyway.
Ten family farms of 10 acres each require more capital and labor investment than one farm of 100 acres growing the same crop. One 100 acre farm won't likely require 10 tractors, 10 farm hands, etc.
Sure, there will be some people who are willing to pay a little more, and take a special trip to the Farmers Market, just as there are people who will pay a premium for Amish-produced armoires. But these are the exceptions. For the most part, consumers will prioritize cost and basic functionality over more esoteric considerations and go for the cheaper, good-enough tomatoes and cheaper, good-enough armoires.
We shouldn't facilitate big or romanticize small. We just need to allow free individuals making free choices dictate the course of the economy. That works.
Hank
Everything is heavily regulated. You want to irrigate your field, fill out an environmental impact report. You have to have your water regularly tested to see what's in it even when it is right out of the well. Where's the runoff going to go? What is in the runoff? It better not go into a creek...
Want to fertilize your field, see above.
It goes on and on, and costs a small fortune to comply with. Make a mistake and get fined out of existence.
Yeah, but just the same, the ingenuity and bounty of American entrepreneurs would blossom with a drop in onerous regulation. People with a patch of land, a dream, and some elbow grease could come up with amazing things we can't even imagine. In farming alone, I'll bet that if people were truly free to produce for profit from their land, some innovative people would come up with great uses of technology and agriculture that would make life that much more profitable for themselves, more comfortable for their customers, and more varied for all concerned.
Was it Milton Friedman, Walter Williams, Thomas Sowell??? -- who said that the free-market capitalist system is the most moral economic and social set-up achievable. It's true. When allowed to be free and to go about their business and not forced by law to support a system that subsidizes imorality, people do great things through the free market. Then again, it's worth remembering that war also brings great technological innovation and development.
Family farms aren’t 10 acres.
Family farms are hundreds of acres and they still can’t make it.
No, I put “free trade” in quotes because it depends on your perspective just how “free” the trade is.
When you’re not subsidizing your ag output and you agree to open your borders to US government-subsidized ag, it doesn’t seem like very “free” trade. It looks more like US government hegemony via food prices.
Canada and NAFTA — oh, you mean the source of BSE in the US beef herd, and the reason for the US rancher/farmer having to put up with USDA regulations that allow them to track a cut of meat down to an individual farm? That “free trade”? Oh yea, that’s wildly popular with US ag producers.
I don’t want people to get sick from bad food...don’t want to be like China. So we have to be very careful though obviously regulators tend to be overzealous. They get paid to make more regulations.
When I say “family farming” I’m using it in the sense that farmers use it: farms where you’re supporting one family and only one generation of a family off of it.
That’s a farm (depending on the commodity involved) between 400 and 4,000 acres.
10 acres isn’t a family farm. That’s a large garden.
To support a family on the farm alone, you need an operation roughly of these sizes:
- beef ranch - about 300 cows, minimum.
- dairy farm - about 200 to 300 milking cows, minimum.
- corn/soybean rotation farming - about 800 to 4,000 acres (minimum) depending on the specific area.
- wheat - depending on the specific area, but a half-fallow system you’re probably talking minimum 2,000 acres or more.
- sheep ranching - 2,000 ewes
You get the idea. We’re not talking small stuff.
Vegetable or fruit farming - you might get by with a place of 400 acres or less, especially if you’re in California and you have a higher-priced product. Usually, this involves a higher risk too. 400 acres of citrus orchard can provide good income, but if you have a frost, you’re wiped out that year, for example.
I’m talking about the price of grain during the mid 90’s. We had NAFTA at the end of 1993 and then we had the 1996 farm bill which was very pro-free market.
Uh, agricultural subsidies don’t keep prices low, they keep them *high*.
If you removed all import and farming restrictions, stopped the subsidies, and let the price find its equilibrium point, it would on average be lower than what we’re paying now. That goes for sugar, orange juice, etc.
It’s a myth that keeping prices artificially high stimulates production and then brings prices back down—as long as the price supports are in place, the price *can’t* come down, and more to the point if the government supported price floor is *too* high (and there is no possible way a central planner can set a good price) then people just stop buying whatever the good is, which *lowers* production. If you happen to have the Baumol and Blinder book handy, then you should find this in there. :-)
Also, why on Earth isn’t it possible for blacks to turn Republican? It’s not an identity politics thing, it’s a policy thing that would appeal most strongly to lower income people, a disproportionate number of whom are black.
You first have to ask why black people are predominantly Democrat, and that goes back to three presidents: LBJ, JFK, and FDR. Rightly or wrongly, these three presidents were perceived as helping the poor and/or black, while the Republicans were seen as not caring about the poor/black.
Of course, *everybody* benefits from economic growth, but that’s a decentralized benefit. A benefit earmarked for a particular demographic is much more visible, and the resulting impediments on economic growth that much harder to see.
There is nothing policy-wise to explain why black people aren’t more Republican/libertarian. We don’t have “anti-black” policies, we don’t advocate discrimination or lynching or whatever. It’s identity politics, it’s misconceptions about the difference between policies that benefit all versus policies that benefit a few.
It’s not so much *beliefs* that we have to overcome, as it is misconceptions. That’s totally doable. It just takes people willing to go out there and make the case.
The price of grain in the mid-90’s has more to do with the excesses shifting from the prior quota production subsidy program to “freedom to farm” ideas in 1996, which by 1998 had caused a crash in ag prices.
There was a short period therein where the Canadian Wheat Board dumped a whole lot of beef and wheat on the US market too, but that (per my earlier point) was not a sustained lower price, it was merely dumping of surpluses by a government that had been stockpiling their surpluses.
The 1996 “Freedom to Farm” bill was an unmitigated disaster. If you didn’t like paying for farm subsidies, you really hated the aftermath of “Freedom to Farm” - cleaning up the resulting disaster has cost the US taxpayer more in subsidies since 2002 than if we had simply kept the old system. The GOP Congress and Bush have created an ag subsidy system since 2002 that is arguably worse than the system they claimed to hate in 1996.
Part of the problem is that the GOP wanted to inflict both trade changes and subsidy changes on American ag at the same time. There’s only so much change that a long-cycle business sector like ag can assimilate at once, and in the 90’s we had a vast increase in environmental/pesticide regs, “free” trade regs, biotech regs and subsidy changes. It is flippin’ insane how much change DC has been cramming down the farm sector’s throat in the last 15 to 20 years. What DC should do is STFU and leave the ag sector the heck alone for about a decade, while stating goals to achieve at the end of the decade. And the goals should be few, clearly represented and simple to understand - eg, a removal of price supports, or a change in trade policy. Then stick to those very few goals (like no more than TWO in 10 years) and actually walk the talk.
I am inclined to like what I see here:
http://www.farmland.org/programs/farm-bill/analysis/farmsubsidies.asp
One problem is that it is voluntary.
“while the Republicans were seen as not caring about the poor/black.”
especially after Goldwater (opposed civil rights act), Nixon (Southern Strategy) and perhaps even HW Bush (Willie Horton ad). That was the way to win the south because those Republicans weren’t so keen on the evangelicals.
The modern subsidies keep inefficient producers in business, which keeps more land in production than the market’s price could.
So you get such things as we see today: huge amounts of land devoted to corn, because of the various corn price supports and government-created markets for corn.
Where I believe you’ve gone astray is that it appears you have an outdated view of what the ag programs do. In the days of FDR through Butz, ag programs restricted production to keep prices high.
Since 1996, that is no longer the case. There are no production quotas on any crop or government-set prices, as we had in the 70’s and 80’s; there are milk marketing orders in some states that restrict the ability of milk to enter the market in a particular area, limiting supply in that area, but not nation-wide, nor is this a production limit per the FDR-era means.
Tobacco was a wholly different system, but we needn’t worry about that now, since the government bought out tobacco acre quotas recently and that system is gone and done.
The programs today subsidize producers, with such programs as Loan Deficiency Payments, direct payments on enrolled acres in program crops, counter-cyclical income programs, crop insurance subsidies and marketing loans, etc. They’re propping up the farmer, not the crop price. The FDR-era programs propped up the crop price, and in so doing, tried to make sure the program price was high enough to support the farmer.
Some modern programs set a price at which the program kicks in; eg, the LDP payments kick in when the local price falls below a certain point, but the LDP does not raise the market price of the commodity. The LDP payment simply goes up as the commodity price falls below the local target price. The price can go as low as it wants to - the point of the LDP is to keep the farmer in business, not to affect the price of the crop.
The post-1996 approach is that the payments keep producers who are not making a profit on their own in business and land that won’t return a net profit in production.
Ergo, today’s commodity prices are lower with subsidies than they would be without them. We have vast overproduction in some commodities and some areas compared to the the break-even cost of production. There is no attempt by the government to set commodity prices any more on large commodities. There is only direct price support program I’m aware of and that’s milk in federal milk order areas, at $9.something per cwt. That low level has rarely been reached, even in California, the #1 dairy state in the nation and notoriously prone to over-production in cycles.
If you removed all import and farming restrictions, you’d likely get a repeat of 1996 to 1998: you’d see farmers race to produce as much as they could while prices were where they are at the starting point, then you’d see a crash in commodity prices by the end of the following year, a cry for the government to “do something” to keep farmers in business and you’d get Congress “doing something” - just as we saw in the aftermath of 1996 and “Freedom to Farm” — you got the 2002 “Farm Security Act.”
And if you didn’t get it when the farmers cried for it as they were going to default on their loans and go out of business, you’d get a cry about a month later when the bankers started having defaults walk in the door. That’s what happened in 1986/1987, when the full results of the Butz years came upon us: we had huge surpluses, commodity prices crashed, resulting in farmers defaulting on loans, etc. One of the reasons why the ag sector isn’t wrapped around the axle in the midst of all this banking/financial sector nonsense is that since 1986, ag lending has pretty much been put off into their own ghetto in the financial world after a lot of banks got stung badly on ag loans.
If Congress were able to keep their nerve even after the bankers were pounding on the table, you’d really hear about it from the consumers two to three years later as ag commodities started finding their own level - at much higher prices as the over-production went away. We saw all the whining and moaning from the usual suspects as ag commodity prices came up to about 50% of their inflation-parity levels here in the last year due to export demand (and a weak dollar) and speculation.
Imagine the moaning we’d hear as the ending stocks came down and prices really went up due to a lack of surplus in the markets? You’d see speculators realizing that low ending stocks would present a situation where even a relatively minor drought shortage in wheat or rice somewhere else in the world could create huge moves in commodity prices here in the US - and they’d set up positions to profit from this - just as they did in wheat over the winter of 2007. The wheat price shocks of 2007 were not due to the popular nonsensical reasons of “ethanol” or any other such thing. There were supply disruptions in the world market, and the speculators were there to take advantage of short-term moves in prices. US wheat production was just fine and we had our usual surplus.
Imagine you have the drought in Oz and the export restriction from Ukraine/Russia at the same time the US has much less surplus than we had in 2007? And imagine that we have a weak[er] dollar in that year.... you’d see wheat cross $20/bu *real* easy.
The US consumer is happily oblivious to the real cost of their food, such as the prices are with the current subsidy programs. The US consumer doesn’t even know where the price of ag commodities is set or how it is set. They don’t know the difference between a spot market and a futures market, much less who plays in these markets.
re: your second point: Why isn’t it possible for blacks to turn Republican?
You tell me. You tell me why supposedly “conservative” blacks would abandon the GOP to vote for Obama, based clearly on nothing but race, after the GOP was their vehicle for success and achievement. In these people (eg, Powell) we didn’t have to correct some mis-perception. All they had to do is ask “How did I get where I am now, and who saw my potential?”
That apparently was not sufficient to keep even someone like Powell from voting his race.
The days of “sign up or else” are gone with FDR. The AAA program of the 30’s was declared unconstitutional even back then. ie, programs must be voluntary.
The problem isn’t that it is optional. The current programs are optional.
The central problem here (IMO) is that it allows the current programs to continue at the same time. In other words, with ACRE, we have not one, but two ag subsidy programs: the 1996-2002 programs, and now the 2008 program. A farmer can be in either one, depending on which one he thinks will net him more money.
How this is progress, I have no clue.
Furthermore, you could have a corporate farm form sub-corporations to milk both programs. One sub-corp goes ACRE, the other stays in the ‘96-’02 programs. They have to select unique acres, but the umbrella corporate organization gets to optimize their income by shifting production from some acres in one sub-corp to the other sub-corp’s acres.
“A farmer can be in either one, depending on which one he thinks will net him more money.”
right, that’s what I was getting at. It is like the optional flat tax proposals. The whole point of the flat tax is to eliminate all the lobbyists and crony capitalism that distorts the market.
“The modern subsidies keep inefficient producers in business, which keeps more land in production than the market’s price could.”
that would stimulate demand for land.
I should point out that there was a real monetary deflation going on during the mid 90’s. The price of everything went down. For example gold, PPI, oil down to as low as ~$10 a barrel. So yes, a lot of things were going on at the same time.
And Dubya is a “compassionate conservative” so he was a sucker for all kinds of spending, not just ag.
Indeed, there is a demand for land, and you can see this in farmland auction prices in the last several years, along with cash rent rates on farmland. Raw ag land, no irrigation improvements or structures, is selling in some midwest areas for as much as $6K/acre. That is an absurdly high prices unless you expect commodity prices to remain high or go higher than they are now.
I strongly suspect that we’re about to see this demand on ag land level off or perhaps fall now that commodity prices are falling as a result of commodity speculation losses. I NB as well that there are ag organizations that are lobbying Congress to require the commodity “index funds” and other large-scale speculators be forced to take delivery of commodities, rather than just rolling contracts or swaps on contracts to play the price moves without taking delivery or setting for cash. That’s likely to suppress prices going forward, which will likely reduce the demand for land somewhat.
I haven’t thought hard enough on the ACRE program to reckon what (if any) impact it would have on ag land prices.
NB that we’re seen speculative bubbles in ag land before - again, by 1986, ag land prices were crashing. The prices had shot up throughout the 70’s due to the growth in commodity prices (including oil), demand, etc. Inflation helped commodity prices shoot up in the 70’s.
Then came 1979, Carter stopped wheat exports to the Russians and we started seeing the whole ag commodity market start to unwind from there on out.
As a result, the bubble in ag land prices popped. Ag land prices came down by as much as 50% from 1980 to 1987.
http://www.farmdoc.uiuc.edu/manage/newsletters/fefo04_10/fefo04_10.html
http://www.extension.iastate.edu/agdm/wholefarm/html/c2-70.html
I think we’re due for at least a correction in ag land prices.
If the subsidy programs changed in such a way so as to remove inefficient producers and marginal land from the production market, you’d see ag land values crash in the less productive areas of the country - probably to something around $1500/acre for raw, unimproved land (ie, no buildings, no irrigation, nothing but fences and perhaps drainage improvements). That’s a complete WAG on my part.
Economic liberty and limited government aren't enough? The majority of the working-class need to be wooed with something else. And many FReepers are buying into this? Is it no wonder then that we find ourselves here today?
My wife and I lived in Norhtern Va made great money but by the time your pay check and the “bastards” took 30% plus 40% of your bonus you had nothing left especially with the house payment. People are dumb. Great post.
The problem is that the GOP doesn’t walk the talk. No one believes that the GOP will deliver either one any more.
Any more, all I want from government at all levels is to be left alone. Just go away and leave me alone.
The GOP can’t even do that any more. They have to “pitch” their ideas at us, per the OP. They’re trying to pitch how they’re going to “help the common person.” I don’t want help any more. When I look at the GOP today, I see nothing but lip service being given to the ideals of economic liberty and limited government. If anything, I see government writ large, incompetent and more expensive than in the DNC’s implementation of the same thing.
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