Senator Hillary Clinton has responded to the animal abuse at the Hallmark/Westland slaughter house and a subsequent recall of 143 million pounds of ground beef, much of it already consumed by school children. The response reflects just how difficult it is to propose policy while responding on the campaign trail to widely publicized events. (I go into more detail on the recall in a commentary that appeared in the St. Paul Pioneer Press on Feburary 19).
Senator Clinton’s food safety plan calls for a “thorough audit of our nation’s food safety system to locate weaknesses and gaps.” While there is nothing objectionable in this proposal, the system has been audited frequently over the past 20 years by the U.S. Department of Agriculture Inspector General, by the General Accountability (then Accounting) Office, by Congressional investigators, by academics and by non-governmental organizations. Their recommendations often have been “accepted” by USDA but seldom implemented. The deregulation of the food safety system and its replacement with de facto industry self-regulation that began in the Reagan Administration continues - audits, foodborne illness, and meat product recalls notwithstanding. For example, when testing determines that a company’s product is contaminated, the company may withhold the product from further government testing that would confirm the initial test and result, at the very least, in bad publicity for the company.
Senator Clinton’s proposal to increase resources for USDA food safety funding by 50 percent echoes many similar proposals. But the problem is not just funding level but the willingness of USDA management to use the funds appropriated by Congress for their intended purpose. USDA management used previous Congressional appropriations to add management layers and commission risk assessments to justify the need for less inspection. Despite the “continuous inspection” requirement of the Meat and Poultry Inspection Act, even large volume producers like Hallmark/Westland lack federal inspectors working fulltime onsite to inspect product. Instead management instructs federal inspectors to inspect the paperwork of plant inspectors who carry out industry “self-regulation.” A new Administration would have to stand up to industry’s attempts, with USDA management cooperation, to restrict federal authority and oversight of slaughterhouses and meat processors.
The regulatory powers of the Food and Drug Administration are even weaker than those of USDA, as the multiple import product safety incidents have demonstrated over the past year. Reorganizing U.S. food safety under a single agency, as Senator Clinton proposes, along with many others, will do little to protect consumers, and indeed, the food industry, if current industry and management practices remain prevalent. If the next Administration extends the current "lite" federal oversight of industry to all products and outsources product inspection, as proposed in November 2007 by President Bush’s Interagency Working Group report, U.S. consumers will be yet more vulnerable to product hazards. The off-shoring and outsourcing of government inspection to private organizations that would certify products as safe for export may provide plausible deniability for the government and a corporate liability shield if imports harm consumers. But the privatization of government inspection and enforcement functions is very unlikely to prevent harm to consumers, the stated goal of the report.
Senator Clinton, and indeed, all candidates for federal office, should develop well-researched food safety policies for a new Administration and a new Congress. The Clinton campaign’s effort to respond to the Hallmark/Westland animal abuse and beef product recall has merely touched the tip of a very large iceberg.
Perhaps no industry will be more affected by climate change than agriculture. Cropping patterns, pests and plant disease, and access to water will combine to profoundly affect our ability to produce food. And rising fossil fuel prices will undoubtedgly affect fertilizer, pesticide and machinery costs for farmers. A 2000 report by IATP Board Member Steven Shrybman concluded that agriculture and the larger global food trade system, supported by free trade agreements and the World Trade Organization, was one of the larger contributors to climate change.
So what do we do about it? Peter Barnes, author and former President of Working Assets, has written an excellent new citizen's guide called Climate Solutions: What Works, What Doesn't, and Why. The short book gently dissects the limitations of poorly designed cap and trade systems currently being considered by Congress. The two main problems: 1) giving away pollution permits thereby reducing incentives to cut carbon emissions; 2) rising energy prices for consumers that will disproportionately hit middle and low income households.
To address these weaknesses, Barnes proposes a hard cap and dividend to reach an 80 percent carbon reduction by 2050. Under this plan, a steadily declining number of carbon emission permits would be auctioned off. Money from the permits would go directly into a trust which would give checks back to citizens to help offset rising energy costs. The Political Economy Research Institute outlines how such a cap and dividend approach would benefit middle and lower class families.
Steadily rising carbon prices would also make investments in cleaner energy, conservation and mass transit more cost competitive. And would spur the government to shift the enormous subsidies that currently go to the fossil fuel industry, as outlined in research by Doug Koplow at Earthtrack, toward renewable energy and conservation.
Barnes' book primarily focuses on U.S.-based solutions, both because of the U.S. historic contribution as the world's largest greenhouse gas emitter and because Congress and Presidential candidates are all talking about climate solutions. But he also puts forth some interesting ideas related trade and a global system for carbon reduction. On trade, he proposes carbon border fees on goods that have carbon fees lower than the U.S., basing the fee on the amount of carbon required to make the product and the carbon price differential between the U.S. and the exporting country. He argues that such an approach would protect U.S. companies who are lowering their carbon and encourage other countries to lower their carbon emissions.
A more ambitious proposal is an Earth Atmosphere Trust which would work similarly to his domestic proposal: A declining number of pollution permits would be auctioned globally and proceeds would go into a global fund. A portion of the fund would then be disbursed to people around the world on a per capita basis or to local institutions in an effort help the poor deal with increasing costs, and the rest invested into renewable energy and climate mitigation.
Dealing with climate change can be overwhelming. And the details matter in how we move forward. Barnes' ideas shed light on many of the tough choices we need to make going forward.
Six years ago, IATP and the Sierra Club published the first study to test brand-name poultry products from stores for the presence of antibiotic-resistant bacteria. The study was at the beginning of our work to stop the routine and unnecessary use of human antibiotics in animal feed to make healthy animals grow faster - a practice the science shows is leading to more antibiotic resistant infections in people.
The study got lots of media attention and some expected criticism from the poultry industry, particularly Minnesota-based Gold'n Plump - which produced some of the chicken we tested. The company didn't dispute our findings of antibiotic-resistant bacteria on its chicken, rather they disputed the media coverage of our findings, arguing before the Minnesota News Council that a local TV story overstated the risks to consumers.
Fast-forward to 2008. Gold'n Plump's current marketing strategy for its "natural" chicken hinges on not using hormones (already banned in chicken) and not using antibiotics except to treat sick chicken. Minnesota/St. Paul Business Journal wrote about the company's research in 2006 which found that "freshness, health and food safety" were most important to customers. The company has billboards up all around the state touting their "natural" chicken without antibiotics. Certainly admirable progress from six years ago.
But the company has gone a step further to defend its label. In January, Gold'n Plump along with Perdue, Sanderson Farms and Foster Poultry asked for a temporary restraining order in federal district court, charging that Tyson Foods had continued to make false and misleading advertising claims that its chicken were "raised without antibiotics." In September, the U.S. Department of Agriculture told Tyson's to stop claiming its chickens were raised without antibiotics because of a dispute over whether the company's use of ionophores constituted an antibiotic. In December, the company and USDA reached an agreement on language related to their antibiotic use. Goldn Plump et al, working together under the banner of the Truthful Labeling Coalition, alleged that Tyson's is still using the old labeling. Although a District Court judge ruled against the restraining order, Conde Nast blogger Jack Flack writes about how the ruling is "not much of a win at all."
This legal ruckus among chicken companies shows how far we've come in six years. Poultry companies are actually fighting amongst themselves on how they can best market their chicken as antibiotic-free - instead of arguing that antibiotic-resistant bacteria aren't a risk at all. IATP and the Keep Antibiotics Working Coalition have had enormous success in pressuring meat and poultry companies to stop inappropriately using antibiotics, particularly those that treat humans.
At the same time, the salvos flying between chicken companies, and consumer confusion around what the industry's labels actually mean, point to the need for a level playing field for all. That's why we need Congress to pass the Preservation of Antibiotics for Medical Treatment Act. This Act would keep all the chicken, pork and beef companies from adding important human medicines to their animal feeds for animals that aren't even sick.
Maybe we can even get Goldn Plump's support?
I am immersed in rereading Tolstoy's classic, "War and Peace." It is a new translation by Pevear and Volokhonsky and it is marvelous. I read the book first as a teenager, partly for show, and mostly because I love books. But if I loved the novel the first time around, I can appreciate so much more of it now.
Take Tolstoy's digression on the various strategists and generals who advise the Russian Emperor, Alexander I, as Napoleon threatens and then crosses into Russian territory. I was struck by the description of Pfuel, a German "theorist-general." Tolstoy is unkind to the Germans in his description of Pfuel (see Book II, Part I, Chapter X if you want to read Tolstoy's views on how various European nations exhibit self-assurance). But what stood out was this quote, "Pfuel was one of those theorists who so love their theory that they forget the purpose of the theory -- its application in practice."
The quote leapt out at me because it applies so readily to the debates on free trade. These debates involve too many rounds of one side, usually people living the consequences of a policy, saying, "This does not work!" And those on the other side, usually people who have the power and position to advise, but who do not live with the negative consequences, saying, "That is because you did not try hard enough. You didn't follow all the policy prescriptions - go back and try harder." At what point can we abandon a world driven by mathematical economists, to get back to our real, imperfect world? A theory of perfect markets is a wonderful intellectual tool, but it cannot substitute for public policy.
In the end, the pure theorists can only take the same grim satisfaction as Pfuel, who does not deem Napoleon's campaigns in Austria, Prussia and Russia to be worthy of the label war, because they don't conform to the theory of how a "proper" war is waged. Yet the cannons and rifles are fired, the soldiers are killed, and the local population and their crops are raped and pillaged, as the hundreds and thousands of men, women and horses that make up the armies and their entourage seek food and fuel to survive. A war by any other name?
During the 1990s, governments created the World Trade Organization, refused to deal pragmatically (let alone morally) with the debt crisis, and insisted on privileging private interests in trade agreements, investment pacts and development spending. At the same time they signed Agenda 21, the Convention on Biological Diversity, the Convention on Tobacco Control and a dozen other agreements that committed them to putting the pubic interest ahead of private gain for a select few.
So who is winning this war of ideals? Tolstoy's Prince Andrei says a battle is not lost by the side that loses the most soldiers, but by the side that runs away. For those of us who do not believe that free trade is the answer to every public policy problem we face, it is time to stop running. More importantly, however, it is time to stop fighting, too. After all, Tolstoy was a pacifist. It is time to focus on the pragmatists, guided by a vision of a better world, but not enslaved to a theory that ignores people's experience.
In her 2006 WIDER Annual lecture, Nancy Birdsall, President of the Center for Global Development, points out how economic policies that ignore existing inequalities exacerbate them. In her lecture, Birdsall points out that the "level playing field" so beloved of trade negotiators and their economists does not reflect the real world, with the result that their policy prescriptions increase poverty and disparities among countries.
Untidy though it may be, so-called "second-best" economics grounded in the real world is richer, more interesting, and much more likely to recognize the whiff of gunpowder than the first-best crowd. Read Dani Rodrik on the subject - he is clear and succinct on the differences.
Whoever wins the U.S. election in November, let us hope he or she is firmly guided by a respect for diverse opinions and a refusal to embrace ideal solutions, where the messy question of who loses and what will happen to them is left for someone else to answer.
Earlier today, the World Trade Organization put out yet another draft text of trade rules for agriculture. Negotiators continue to press on, despite a growing consensus that further trade deregulation is not what is needed to address increasing global inequities between rich and poor.
In a press release we put out today, the director of IATP's Trade Information Project, Carin Smaller, summed it up this way, "The text looks like a bad repair job. The Chair of the Agriculture negotiations, Ambassador Falconer, has filled in some of the holes, but the basic design remains fundamentally inadequate. The walls of the house are crumbling down. This latest paint job is not going to fix the problem.”
A new poll by BBC World backs up the idea that the WTO bubble contains different air than the rest of us. In a survey of people in 34 countries, 64 percent felt that the benefits and burdens of globalization had not been shared fairly. The weight of opinion in 22 countries was that "economic globalization, including trade and investment" is growing too quickly. And this poll was taken before the global stock market fall in mid-January.
IATP will put out a more detailed analysis of the new WTO agriculture text next week.
On January 1, 2008, the North American Free Trade Agreement (NAFTA) came into full effect after a 15-year phase-in for more sensitive agricultural products like sugar, white corn, beans and dairy. This means the last remaining tariffs are no longer legally binding, including those on sugar imported from Mexico to the U.S., and vice versa. Additionally, the Mexican government will no longer block imported high fructose corn syrup from the U.S., which competes directly with sugar in the Mexican sweetener markets.
The expected fallout threatens to hurt sugar farmers on both sides of the border. This threat is so dire, that it has provided an impetus for Mexican and American sugar growers to reach an historic agreement to modify the final implementation of NAFTA.
First, let’s look at the chaos NAFTA is expected to bring to sugar markets in the U.S. and Mexico.
An expected import surge of U.S. corn syrup will likely displace Mexican sugar from the Mexican sweetener market. Mexican sugar growers also face the prospect of increased U.S sugar imports, because the current U.S. cost of production for sugar is less than in Mexico. Moreover, increased imports from other countries have created a substantial U.S. surplus of sugar that could be dumped into Mexico.
In the U.S., sugar displaced from the Mexican market by corn syrup could be exported to the U.S. This could overwhelm the delicately balanced U.S. inventory management system, already under siege by increased imports from World Trade Organization (WTO) and Central American Free Trade Agreement (CAFTA) obligations.
All these threats taken together would likely depress sugar prices below the cost of production on both sides of the border, resulting in a shutdown of most of the North American sugar industry.
However, there is more at stake here than the fate of an agricultural commodity. Sugar is Mexico’s largest remaining agricultural industry. According to the U.S. Department of Agriculture Foreign Agricultural Service, there are an estimated 158,000 sugar farms in Mexico that average 10 acres in size. These farms supply 58 mills located in 15 of the country’s poorest 35 states. The Mexican sugar industry directly employs more than 300,000 workers, including cane cutters, seasonal field workers, and factory workers; and indirectly supports another 2.2 million jobs.
The NAFTA-mandated destruction of the Mexican sugar industry would likely cause a new wave of immigrants to try to find work in the United States. This new migration would rival the well documented surge of Mexican migration caused by U.S. export dumping of yellow corn into Mexico facilitated by NAFTA over the last decade.
Thus far, Mexican sugar farmers have been spared the devastating effects of dumped imports because the Mexican government has refused for 15 years to deregulate their sweetener market. Just as importantly, U.S. sugar growers have had enough political clout to defend their own sugar program that—unlike other U.S. farm programs—manages inventories, prevents overproduction and export dumping, and guarantees farmers a fair price at no cost to U.S. taxpayers.
For decades, high fructose corn syrup has competed with sugar in an increasingly integrated sweetener market. In fact, the rules for this sweetener war under NAFTA have been continually in dispute literally since the signing of the agreement in 1994. As NAFTA forced Mexico to deregulate its sweetener market, cheaper U.S. corn syrup began taking market share away from Mexican sugar growers, especially in the soft drink market. Mexico tried to protect its sugar growers: first with anti-dumping measures; and then with a tax on corn syrup. However, the U.S. government, on behalf of the Corn Refiners Association (including Cargill and Archer Daniels Midland), dutifully challenged Mexico’s actions before international trade tribunals under both NAFTA and the WTO, and won.
Significantly, the agreement reached by U.S. and Mexican sugar growers sets the stage for managing the sweetener market between the two countries in a way that could benefit farmers in both countries. Specifically, the deal would modify the implementation of full NAFTA deregulation of Mexican and U.S. sweetener markets by:
· Building on a provision currently included in the pending Farm Bill that would allow the use of some sugar to produce ethanol as a means to manage excess supplies.
· Managing sugar supplies used for ethanol production separately from sugar used for human consumption; a prudent step given the growing controversy over fuel versus fuel.
· Limiting import surges of Mexican sugar exports to the U.S. caused by displacement of Mexican sugar from the anticipated import surges of high fructose corn syrup being dumped by multinational agribusinesses into Mexico.
· Managing the two countries’ sugar re-export programs to provide a smoother and more predictable transition to a more integrated North American sweetener market.
· Providing Mexican and U.S. sugar growers with preferential market access to North American sugar markets—both for human and ethanol consumption—while still fulfilling the two countries’ existing WTO and other international trade commitments.
· Establishing a Joint Mexico-United States Sugar Commission to resolve future disputes, rather than leaving them up to secret NAFTA tribunals.
The agreement has been circulated among appropriate government officials in both countries, and various options have been suggested for moving the agreement forward.
The mutual threat of lost markets and livelihoods has compelled Mexican and U.S. sugar farmers to work out an agreement that will give both sides a fighting chance to survive. The deal could help resolve the endless trade disputes and uncertainty that have wreaked havoc in the sweetener market since NAFTA was signed. It could curtail the otherwise inevitable increase in cross-border dumping of sweeteners that threatens to irrevocably damage the North American sugar industry, which is so important to both the Mexican and the U.S. economies. Finally, it could help us avoid another displacement of Mexican agricultural workers who will be forced to migrate north if we allow NAFTA to be implemented unencumbered.
For more information on the connections between agriculture, trade and immigration, go to Trade Observatory.
We've written about the environmental drawbacks of major increases in corn production in the U.S., particularly related to nitrogen runoff into waterways. But another potential problem is looming. Biotech company Monsanto (manufacturer of Bt corn) reported in January that in an effort to cash in on high corn prices, fewer farmers are planting biotech crop refuges designed to control pests. One important outcome could be the dimished effectiveness of a valuable pest control tool for organic and sustainable farmers.
Currently, farmers who plant genetically engineered Bt (bacillus thuringiensis) corn and cotton are required to set aside part of their land to protect against pest resistance. The target is the corn borer and corn rootworm. Engineered Bt corn has the pesticide inserted into the cells of the plant. The pest dies after eating the Bt corn. From a pest control standpoint, the concern is that if too many pests eat too much Bt corn, over time they will develop a resistance to Bt, and the technology will lose its effectiveness. In order to protect Bt corn, the Environmental Protection Agency (EPA) requires farmers to plant at least 20 percent of their corn acres with non-Bt seed to delay insect resistance to Bt traits. The idea is that any pests who are starting to develop a resistance to Bt will mate with others living in the refuge - and thus dilute the development of resistance.
But here's where the credibility of the set aside program breaks down. The EPA doesn't monitor its implementation. It's up to the biotech companies who do the monitoring by calling farmers on the phone and reporting back on compliance. It's hard to see how the industry is a disinterested party in documenting compliance. So when Monsanto reports a potential problem - it's worth paying attention.
In January, Monsanto's Scott Baucum told attendees at the Illinois Crop Protection Technology Conference at the University of Illinois that compliance with the crop set aside system declined in 2007. While Baucum wouldn't say how much compliance had declined, 2006 overall compliance ranged from 80 to 95 percent.
Monsanto and the National Corn Growers Association are so concerned about non-compliance that they have kicked off a new education campaign with postcards to their members and billboards in top corn producing states about the need for farmers to plant Bt refuges, according to DTN (sub required).
The development of pest resistance to Bt could be significant for organic and sustainable farmers. In its natural form, Bt is derived from a soil bacterium that naturally repels plant pests and has been used as a last line of defense by organic or low-chemical farmers in a spray form for decades. Since the natural Bt spray degrades in sunlight and evaporates from plant surfaces within a short period of time, farmers don't have to worry about Bt residues contaminating food or building up in the soil.
After decades of low-priced corn, often below the cost of production, there is enormous pressure on farmers to take advantage of rising corn prices. The potential for increased pest resistance is yet another reason why we need the federal Farm Bill and state policies to help us shift toward more diversified and resilient cropping systems. The biofuel boom has certainly played a role in the massive growth in corn acres and higher prices. But it has also accelerated the need to build a biofuel system based on perennial energy crops.
Much of the recent Farm Bill debate has focused on subsidies for rich farmers, but what about government support for some of the largest multinational agribusiness companies in the world? Research released last month suggests that stripping away direct and indirect subsidies benefitting meat and poultry companies could bring dramatic changes to our farm economy.
Elanor Starmer and Tim Wise at Tufts University's Global Development and Environment Institute first looked at how underpriced animal feed allows big poultry, hog and beef companies to undercut smaller, more diversified farmers. They found that industrial livestock operations (hog, broiler, egg, dairy, and cattle) that contract with the big meat and poultry companies got a $35 billion boost from under-priced animal feed from 1997-2005 - amounting to a 5-15 percent reduction in operating costs.
How did animal feed become so under-priced? The 1996 Farm Bill stripped away the last remaining production controls for most major commodities. So, in the nine years following the 1996 Farm Bill, production rose (28 percent for corn and 42 percent for soybeans), and prices fell (32 percent for corn and 21 percent for soybeans), according to Starmer and Wise. In the nine years following the 1996 Farm Bill, corn prices averaged 23 percent below production costs and soybeans averaged 15 percent below production costs.
And the big boys in the increasingly consolidated meat and poultry sectors cashed in. According to Starmer and Wise, the nation's largest industrial broiler chicken company Tyson Foods saved $1.25 billion a year, or $11.25 billion over nine years, from under-priced animal feed. And the nation's largest industrial hog company, Smithfield Foods, saved an estimated $2.54 billion over nine years from under-priced feed. Starmer and Wise concluded: "taxpayers and farm families have, in effect, been subsidizing factory farms' feed purchases."
The next step was to consider the various environmental costs associated with CAFOs that have been subsidized by taxpayers. The New York Times' Andrew Martin reported this month about how the Farm Bill's Environmental Quality Incentives Program (EQIP) has devolved from its original intent to help farmers with small scale conservation projects to providing a direct subsidy to CAFOs to deal with the "mountains of excrement that their farmers generate." In 2006, taxpayers sent these mega farms about $179 million for animal waste management, Martin reported. Early this year, Congress will renew the EQIP program as part of the new Farm Bill and is actually considering expanding the program to provide more subsidies for CAFOs to clean up their mess. IATP's David Wallinga has written on a number of problems CAFO operations can create through air pollution, water pollution, and health risks to farmers and workers - all costs not accounted for in the price we pay at the supermarket.
In focusing on hog production, Starmer and Wise calculated the additional cost to these operations if they actually paid for environmental clean-ups and mitigation. They found that if CAFOs had to pay the cost of alternative manure-management to protect the water and reduce over-application, it would raise hog CAFO's operating costs by 2.4-10.7 percent. In a climate of full cost feed and environmental regulation, CAFOs would see their operating costs rise by between 17.4-25.7 percent. This increase would eliminate the apparent cost advantage CAFOs currently have over mid-sized diversified hog producers.
This new research is a blunt reminder that the U.S. agriculture market is massively distorted by misplaced priorities. Our current system is no accident or the result of market forces. Rather, it is the deliberate outcome of a U.S. farm policy geared toward fewer farmers and larger more industrial operations. U.S. government leaders going back to President Eisenhower's Secretary of Agriculture, Ezra Taft Benson, have been telling farmers: "to get big or get out." And our policies have reflected that bias.
One bump in the smooth ride for the big meat and poultry companies is the recent rise in corn and soybean prices. Corn prices have risen to over $5 a bushel, soybeans to over $9 a bushel. But what happens if prices crash? Al Kluis of Northland Commodities told the Star Tribune that "the history of commodity bull markets is that prices will drop twice as fast as they went up."
Unfortunately, neither the House or Senate versions of the Farm Bill address price volatility, despite a number of proven policy tools that could help ensure prices don't go too high for consumers or too low for farmers. A system of fair prices for farmers and consumers, combined with a full accounting of environmental and health costs, would help level the playing field for farmers of different sizes. In that alternative future, our farms and supermarkets might look a lot different.
In his January 16 column in the New York Times, Professor Steven Landsburg criticized Republican Presidential candidates for pandering to displaced workers in Michigan, counter to the free trade dogma that he supports. We have benefitted greatly from the cheap products that international free trade provides, he asserts. Can’t these politicians leave well enough alone and let us all be thankful for everyday low prices?
Dr. Landsburg is a professor at the University of Rochester. I grew up outside of town there and it’s a region that I know well. Were there any suitable jobs in the region, I might never have left. To understand why candidates feel the need to pander about job losses, I suggest Dr. Landsburg take a short drive north and west of the University’s campus.
Like many rust belt cities, Rochester has suffered shocking urban decay. Certainly, the social upheaval of the 1960s and 1970s was a large driver for the urban decline. But like a good band-aid, a strong economy has mended these social conflicts in other parts of the country.
As Dr. Landsburg drives outside the Rochester city limits, he would pass the enormous Kodak manufacturing facilities that once employed my father, my uncle, and for one summer, me. But Kodak and Xerox (also based in Rochester) have struggled in a new global marketplace, and shed local jobs in favor of production elsewhere.
My father’s generation joked that Kodak was growing so quickly that someone simply needed to walk and chew gum to get a job there. My generation jokes that we might as well have our class reunions in North Carolina because everyone seemed to be moving south for jobs.
Traveling west out of Rochester, Dr. Landsburg would soon come to several towns well known for apple production. But since China crushed the market with incredibly cheap apple juice concentrate, the apple industry has languished. Many orchards close to Rochester became housing developments, some have been replaced for lower-value corn production, and others just lie dormant.
And then, just north of the orchards is massive Lake Ontario, which creates the micro-climate that allows apples to thrive, as well as the water supply that attracted so much industry in the 19th and 20th centuries. But due to pollution and the decline in several fish species, commercial fishing no longer exists. Since Rochester isn’t using much of the water, corporations and other regions of the country have proposed taking the water somewhere else. Our proud Great Lakes economy has reached the point where selling off natural resources is an economically attractive option.
Dr. Landsburg implies that policymakers in regions like Rochester should simply let the market work, despite the questionable track record of that strategy. Of course, I get excited about great deals when I’m shopping, but I do take umbrage at a narrowly focused economist criticizing desperately needed local economic development strategies.
We’re not going to get very far by selling fast food to each other. Economies need production, whether it is agricultural products, manufactured goods, computer software, or tourism. Reducing our economy to exclusively cheap prices denigrates labor, devalues family and community, and ignores quality of life.
Unlike Dr. Landsburg, I applaud proposals that bring value back to our communities. Getting government out of the economy does not create a free market – it just leaves the market to the whims of the multinational corporations. Low prices are not enough.
The Financial Times today published a profile of Chinese dairy
giant Yili. While it might be unfair to describe the piece as “fawning,” let’s
just say it’s surprising that such a long story cites only one source aside
from the company itself, and quotes no one other than the company’s CEO, Mr.
Pan Gang. The reader gets a touching tale of how a collective dairy factory in
Inner Mongolia worked its way to national prominence despite the tremendous
challenge of having to deal with huge numbers of small, backward farmers. We
hear how fiercely competitive the dairy market is, with Yili the only “purely”
Chinese firm vying for market share with a host of foreign and joint venture
rivals. And we feel Mr. Pan’s anger about tax breaks the Chinese government
gives to foreign dairy firms, who turn around and use that advantage to
undersell local companies.
The real picture is a bit less heroic and more complex.
Despite its complaints about the unfair advantages of its international
competitors, Yili has always had lots of government support. Its expansion to
now buying milk from a million farmers (!!!) has depended on those top-down sweetheart
deals with local officials that the farmers in Yunnan were complaining about
last week. (I was expecting a more critical take on this from an article titled
“Chinese Dairies Milk The Local Advantages.”) And even if they weren’t being
rounded up for Yili by local government, farmers would have few alternatives
for their milk. Yili and Mengniu, another Inner Mongolia-based giant, have over
55% of the Chinese market, and probably a much higher percentage in the
Northeast. Economists tell us that the definition of “oligopoly” is when the
top four firms in any industry control over 40% of the market. Recent food
safety scandals are speeding up the process, Pan says, since nervous consumers
are sticking with big brands and this is driving out smaller players.
Yili’s earning for the first three quarters of 2007 reached
14.8 billion RMB. (about $2 billion) A Reuters story tells us that as of the
end of the Third Quarter, 40% of China’s dairy farmers were losing money and some were
having to kill their cows. Welcome to Modern Farming!