Friday, July 23, 2010

Agricultural Reform


I don't know how many of you are Distributists; I consider myself in the Distributist camp, although I can't say I fully agree with the whole Distributist program, not so much because I have positive disagreements as because what I have read on Distributism is somewhat scant.

Of course, not knowing what I am writing about has never stopped me from writing about it. Case in point: my new article up at The Distributist Review on five practical ways to reform agriculture in this country for the following three ends:

(1) Restoring agricultural production to its pride of place in the economy
(2) Weaning Americans off of cheap, foreign produce
(3) Enabling Americans to enter the agricultural vocation with greater ease

Basically, I just wrote on what I thought was common sense and found out it was Distributism. Anyhow, if you are a Distributist or are interested in things economical, check out my article here.

19 comments:

haskovec said...

Tax values are based on the market. They take comparable values of similar pieces of land. This isn't unjust as it actually represents what people are willing to pay for a given piece of land. Obviously this isn't perfect and there is some approximation in it, but taxing all undeveloped land equally is unjust to people who actually have land that is less valuable as it is less accessible or has less resources as now people get to under pay on their taxes for the prime land while the rest of society bears the cost. Additionally I grew up in a rural area in Minnesota (live in Dallas now) and I can say that the prime farmland was valued much higher than land which wasn't suitable for crops so the market there recognizes the value of agriculture even if it isn't as recognized near large cities.

I think a lot of your second point has come about from the government intervention into agriculture. They ended up subsidizing large interests at the cost of family farms. But there are other factors. Given the price of equipment, you need a certain amount of scale to pay for it. For example a lot of these new combines to harvest corn cost in excess of $250,000. So when you are talking about 1 piece of machinery that costs the same as a house you have to be growing a lot of corn to pay for that machine. That doesn't even cover the tractor, or planter or anything else you need to get set up. In my experience with people who were successful farming (my grand parents) it is a pretty hard life and while you are working all of your cash is tied up into the farm so you don't have much money. When you retire you are sitting on assets worth a lot and are in a good position when you sell off your equipment and land. My parents lost their farm when I was in second grade and I think that was a case of the debt required to get started (for all the said purchases) combined with insanely high interest rates at that time in the 80s and some unfortunate luck with some crop failures and some pigs that died because of a disease outbreak.

Point 3 on tariffs just hurt everyone. Western agriculture is already highly subsidized. Even if you look at something like the tariffs on ethanol is a backdoor subsidy to corn farmers. Then you have sugar tariffs which have resulted in high fructose corn syrup in all of our foods instead of sugar. There are already far too many tariffs and they favor the inefficient producers at a cost to the rest of society. If you pay attention to the WTO trade talks they have continued to fail as the developing countries are upset over all the agricultural subsidies that the US and Europe give to the farmers so these poor farmers can't compete. If you up the tariffs additionally you just hurt the poor as you make them pay more for food, cheap food is a blessing, we need to work on getting more cheap healthy food instead of all the processed junk food.

Interest free loans would also just encourage excessive debt, it isn't some magic formula. Look at what happened with excessively low interest rates in housing it just drove up costs as you had more people chasing the same number of goods. The market should price interest rates based on their true risk as that sends a message about whether or not it is a good time to invest in expanding production or to focus on just making money and paying down debt. Without that signal you can get everyone investing in capacity when that isn't what the market is asking for.

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BONIFACE said...

Haskovec-

Well, I am perfectly willing to entertain the idea that none of these proposals would work - it was just a thought experiment.

But, a few things:

1) I don't think land valuation could ever be perfectly "flat"; obviously there would have to be some discrepancies, but you can't deny that land speculation is a huge problem. Just because the value is determined by the market does not make it just - it is unjust to tax property for things that do not yet exist in actuality - as if your house or property were to be taxed at a higher rate because you could conceivably put a garage or barn there.

Re; tariffs - a tariff is not a subsidy. A tariff is a barrier to allowing cheap, foreign crap to flood the market. A tariff is a way to get American farmers off subsidies. Tariffs are one of the few tools granted to the federal gov't in the Constitution for this very purpose. The founders had no problems with tariffs, nor did most Americans, until they started getting low in the 20th century and allowing all the cheap crap in. Stuff like NAFTA was an utter disaster.

Interest free? How about low or subsidized interest - this is already done with student loans. And just because a loan may be "interest free" or "low interest" does not mean it is s subprime loan or easy money - supposing the interest were low but the criteria that needed to be me to get the loans were strict?

Anyhow, the way we currently handle our agriculture is horrible and allowing globalism to just take its course isn't an acceptable answer.

CO said...

Boniface,

I dissent on all 5 proposals.

You might be interested in my response here.

CO

haskovec said...

Regarding Tariffs, Tariffs were originally used for revenue in this country because we didn't have income tax. If we got rid of income tax I would have more room for Tariffs as a way of funding government. I believe early on most tariffs were under 10% if they were intended to create revenue for the government. Anything above that was considered punitive. We see tariffs that are much higher now, like the tariff on ethanol to protect the highly subsidized ethanol from corn business where there is a 100% tariff on it. The reason for it, otherwise Brazil could sell us ethanol from sugar cane much cheaper. But even allowing this punishes all of society as a whole. Not sure if you recall a few years ago the price of corn went really high, because it was all being turned into ethanol. This presented a further problem as the corn went up many Mexican people were having a hard time affording Tortillas as they import a lot of their corn for consumption from us. So here we have a situation once again where all of society suffers from tariffs and subsidies the poor the most. Brazil loses a chance to sell ethanol to us produced more efficiently and cheaply (which we could use in our E85 fuel), then our farmers are encouraged to grow excessive amounts of corn to turn into ethanol (thus depleting the soil and causing more fertilizer usage), then the Mexican's price of corn rices hurting their poor when they can't afford their staple, and to top it off that extra fertilizer runs off into the rivers which flows into the gulf and causes algae bloom that kills life in the gulf. Small intervention in the marketplace by the government has large effects and distort things in many unexpected ways.

BONIFACE said...

Haskovec-

I agree that the government should, as a rule, refrain from interfering in the market, but I do not believe it is a rule with no exceptions, nor do I concede that intervention is always disruptive.

From your answer, may I assume that you support the (in my opinion) illegal 16th amendment?

haskovec said...

No I believe the income tax is immoral. My response was I could support a mild tariff to fund the government (like I said 10% or less), but I would want to get rid of the income tax if we were doing that, as we are already over taxed in this country.

BONIFACE said...

Haskovec-

I would support such a tariff, since that's all the gov't had to fund it prior to 1913. When I threw out the 20% number in my article, it was just a "for the sake of argument" number, not a real reflection of how high I thought a tariff should be set. I was just trying to make the point that the amount of market share open to domestic growers would be proportional to the percent of the tariff on foreign imports, be it 3%, 10% , 20% or 100%.

Do you see it as essential to allow foreign imports at all? What about a situation in which the US (hypothetically) said, "From this day forward, no foreign imports of agriculture AT ALL will be allowed into the United States." What would be "wrong" with such a scenario, other than the canard that it is "protectionism", which for me, is not a bad thing.

haskovec said...

Yes, I see it essential to all foreign imports. First of all we are supposed to have liberty in this country so if I want to buy produce grown in Mexico I should be able to (baring disease concerns and safe import). Additionally we can't grow everything in this country so you are saying if certain fruits can't be grown here that Americans shouldn't have access?

How is it moral to deny poor farmers access to consumers who want to purchase the fruit of their labors? We are rapidly approaching the day actually where we don't produce enough to feed ourselves if you look at what is produced in this nation vs consumed so if we cut off imports you are going to have people starving in the next 50 years.

Let's assume we can produce all the produce we need and all the types of produce eaten by anyone in this nation in that scenario I still wouldn't support it. By cutting off our farmers from competition you are encouraging inefficiency and the rest of society pays for the more expensive produce as a result. So once again by cutting off imports you are punishing the poor of this nation as their food costs go up. I see your proposal as an attack on the poor of our nation through higher food costs and the poor farmers of the world by trying to deny them access to a wealthy market.

Additionally part of the reason we have been able to rise this nation to the level of wealth that we have has been through the division of labor, if we are all living as subsistence farmers here we are going to be much poorer. If we allowed the cutoff of all foreign produce how long before we shut the doors to foreign steel. Less international trade impoverishes the entire society.

BONIFACE said...
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BONIFACE said...

A few points, though: throughout much of history, many societies existed self-sufficiently without any imports at all - medieval villages being one example, but also isolated kingdoms like ancient China where all trade went on within the Empire. I don't think you can say that any nation NEEDS foreign trade in the absolute sense.

Regarding allowing poor farmers to access our market, my response is that the problem is simply not my concern. When I propose things for our economy/country, I do so out of the good for our country, not because I care about the economy of Mexico or any other third world country. I care about those people and their well-being, but not enough to allow our own workers to be put out because of foreign competition. Even if there wasn't foreign competition, don't you think there'd be local, regional and intra-state competition?

To Mexico and places like it, I say, "Fix your own damn problems and stop existing as parasite countries." I say let our own nation be strong and self-sufficient, teach other nations to do so as well, and strive towards a kind of anti-globalism - a system where every country is more or less self-sufficient and nobody "needs" anybody else economically - it's bull-bleep that our markets are now affected by every ripple in Greece, Singapore and every other place on the earth. We should have enough independence economically to where all of Asia could sink into the ocean and it wouldn't effect our market. I'm speaking with some obvious hyperbole here, but you get my drift.

haskovec said...

But passing a policy of eliminating all foreign produce helps the farmers and hurts the rest of society who have to pay higher prices for more inefficiently produced produce. As if it can be done better here it will be and the foreign produce won't be able to compete. We have the technology and mechanization advantages it isn't hard for our farmers to compete with some guy who lacks capital and equipment. Therefore is someone can sell it cheaper then let it come here as all of society benefits from lower priced food. The money saved on food can be put into other productive enterprises which creates greater wealth for all of the society. I recommend you check out the book economics in one lesson by Henry Hazlitt, he makes a pretty compelling case about about why intervention to help out one segment of society makes all of society poorer as a result.

BONIFACE said...

Are you not making the unwarranted assumption that cheaper means more efficient? Competition is not fair or free when one country is using near slave labor to make something and selling it to us while keeping their own currency artificially debased. That's not free trade - that's just stupidity on the part of the country that gets the pointy end of the stick.

American farmers are not inefficient (and by the way, when we talk about efficiency, efficiency for whom? Workers, consumers, or maybe big businesses?). Does the fact that Ford closed down the Wixom, MI plant and moved its jobs to Mexico to save money mean the US workers were inefficient? And by the way, when Ford did move the jobs to Mexico, the Ford automobiles didn't get any cheaper - they still charge the same, they just pocket more of the profits. It's wrong and immoral.

haskovec said...

Cheaper is better for society as a whole. If someone can do something cheaper than you it is advantageous to your society to let them do it and you focus on where you add value. Both societies end up richer that way. As Toyota has shown US Labor can compete in manufacturing, however the unions have made the labor inefficient which is why Detroit isn't competitive. That is also why all the new manufacturing is going up in the south in right to work states where unions aren't putting the companies out of business. And Ford probably had to move those jobs just to keep the cars at the same price. You don't know that the cars were profitable when produced in Wixom. And if they can make more money manufacturing in Mexico then they can invest more in R&D here and hire more engineers, or they can give the money back to the share holders (in the form of a dividend) which can then be invested in other productive sectors of the economy. Given the incentives we have seen from automakers the last few years are you sure they aren't getting cheaper. The sticker price may not be, but they are taking so much off and 0% financing I would say they have gotten cheaper.

BONIFACE said...

We are in agreement that the Unions were the big problem that made the Big Three uncompetitive - by the way, there is a great book by Paul Ingrassia called "Crash Course" that is all about this.

But, I don't think the 1,200 people in Wixom that lost their jobs to a bunch of Mexicans would care too much about dividends to shareholders. I know different parties have different interests, but it sucks just the same. No American should ever lose his job to a foreigner, especially one from a parasite country like Mexico.

CO said...

Boniface,

Part II of my response is now here. Sorry for being so late.

Still busy,
CO