Friday, November 23, 2012

The unfree market

I asked the question awhile back, "Is the mega-farm really the only way to feed America?"  Of course it isn't, but the question I really should have asked is this: "In a free market, is it necessary that farms become fewer and bigger?  Is there a comparable profit in small farms that can rival large farms?  Or is the only way to ensure more sustainable, responsible farming to abandon the free market?"  This, of course, I don't want to do, because I don't see how you can be considered a free person if you don't have the economic freedom to start a business and prosper by the work of your own hands.

I've been reading and reading, and the answer is clear.  It answers so many other questions as well.  The answer is: In America, in 2012, we do not have a free market.

Now, we're not socialist.  The system we have is capitalist, but it's crony capitalist.  Certain large corporate interests are being protected by the government from having to weather the vagaries of the free market.

Take farming, for starters.  I happen to know that a tomato, even an organic tomato in tomato season, from California is cheaper than a local Virginia tomato.  As a result, grocery stores carry California tomatoes and don't carry Virginia tomatoes.  Virginia tomato farmers have a lot of trouble staying in business because of this.  But why is the California tomato cheaper, when it's got to travel thousands of miles by refrigerated truck to get to market?

The answer is, because of the unfree market.  First off, food distributors are allowed to write off transportation costs as a tax deduction.  I have no idea why this would be so, when I thought our government wanted us to use less oil, but there it is.  Those thousands of miles might as well be just around the block, because it doesn't cost the tomato producer the amount it should.  The second reason is minimum wage.  A Virginia tomato farmer has to pay his workers $7.50 an hour, which is a lot of money.  But the California farmer has plenty of illegal immigrants to choose from who will harvest his tomatoes for less than half that.  The California farmer is saving a lot of money, and he can afford to sell his tomatoes for cheaper than the Virginia farmer.  If he can manage to drive Virginia farmers out of business altogether, he may then be able to jack the prices back up.  That's how monopolies happen.

Of course one reason why California grows so many vegetables is because it has such a favorable climate, right?  That's no one's fault.  Except in a way it is.  Southern California is sunny a lot of the time.  That means fewer days of rain.  But fewer days of rain means not enough water for the crops.  Farmers have to irrigate their land.  The price of the water they're using should be passed on in the price of the tomatoes, right?  Well, not entirely.  The government of California lets farmers pay a discounted rate for water, a rate individuals can't get.  As a result, California (and surrounding states) have a serious lack of water.  The Colorado River doesn't even reach the sea anymore; it peters out because of all the cities and farms that draw from it.

Just think how much water would be saved if we grew tomatoes in places where it rains more.  And think how much less oil we'd use if we all ate tomatoes that grew a few miles from us, at the very least during those times when they're in season.  Of course I personally favor the idea of my local economy flourishing and farmers who want to keep the family farm being able to do so.  But the government is favoring large national producers over small local ones.  They do this in other industries, too.

Why would they do that?  Well, agriculture is a huge lobby group.  Large corporations keep paid employees lobbying in Washington fulltime.  They also donate large sums of money to political campaigns.  And where's the political action committee that donates money and lobbies to support small farming and fresher food?  There isn't much of one.  If you're struggling to keep your farm afloat, you don't have time or money for that.  And if you're just buying tomatoes, odds are you don't even read the sticker or know where it's from.

That's just one case, and it's just farming.  I could go on about subsidies for commodity crops (like corn and soy) instead of for vegetables, or how the system is set up so the biggest, richest farmers get the most.  Or I could talk about how dozens of tiny regulations keep it unprofitable to start a new business and keep it small, like laws about parking lots and handicapped restaurants and food handling codes, which are easy to follow if you're huge, but difficult if you are just starting up.  But let's leap straight to the biggest unfree market scheme I know of, one which is ripping you off right now.

It starts with the Federal Reserve, of course.  Say the government decides we need some economic stimulus.  So the Fed (which, by the bye, is not actually a government agency -- it's a private bank which works for the government) prints out a bunch of money.  Of course every time it prints money, this causes inflation.  The dollars in your pocket are now worth less.  But that's okay, that money is for stimulus -- it's going right back to you, right?  Well, sort of.  What the Fed does is loan the money out at low interest rates (right now, 0%) to banks, in the hopes that the banks will loan it out to you or various corporations and similarly low rates.  That money will be spent, and the increased economic activity will get the economy moving a bit better.  At least, that's the theory.  There's some doubt as to whether this works at all.

But we'll never know, because that's not what the banks do.  They have all this free money and need someone to lend it to.  Whom will they choose?  Who can give them a good return on all that money?

The United States government, of course!

The banks charge the U.S. 30% on these loans.  First off, because the government isn't so great at paying back debt, and second, because they don't have a lot of choices for who to borrow from on the scale they need.  And of course, the government has to borrow money because we can't possibly write a balanced budget.  Each party has lots of things they refuse to cut, and no one will be the bad guy who raises taxes, so we run a deficit every year.  That deficit is funded by borrowing money, partly from foreign banks but mostly by domestic banks.  A huge portion of our budget every year goes to paying interest.  What that means is paying banks -- paying banks for money they borrowed from the Federal Reserve, which the U.S. government authorized them to print.  I thought that when the government printed money, it used that money to pay its bills, which is bad enough.  That would be taking our money by inflation rather than by taxes, but at least it would go to things that theoretically we voted to spend money on.  Instead, the whole thing is arranged to give a huge cut to large banks every single time.

That's what I call stealing from the poor and giving to the rich.

But what galls me more than anything is when I read long complaints against the issues with our system -- things like large farms buying out small farms, large stores buying out small stores, and the rich getting richer while the poor get poorer -- and hear, "See?  That's what happens when you have a free market."

For the last time, people: WE DO NOT HAVE A FREE MARKET.

Could a free market solve all these problems?  Some, for sure.  Some, it would just give individuals more ability to change things through their own choices.  For instance, it can't prevent me from buying out-of-season tomatoes from California, but it could make the prices of local and nonlocal tomatoes comparable so that I could choose which I wanted without breaking the bank.  But for the government to protect large interests at the expense of small ones is inexcusable.  The role of government, as I see it, is to prevent the strong from oppressing or cheating the weak, so that everyone has as much freedom as possible.

Ideally, the government would give the same benefits to everyone alike.  They would avoid rules that are a greater burden on some than on others.  They could even make regulatory laws for large businesses, because it is very little trouble for them to comply, while exempting small businesses that have difficulty complying.  That still seems fair to me.  But a government that favors the strong and wealthy at the expense of the weak and poor?

That's not okay with me.


Enbrethiliel said...


This is slightly off topic, but it's about the modern food industry, just like this post, and I thought of you when I heard it. =P

A few days ago, I was asking a client from Spain about an activist group in Madrid that go through bins for food that has been thrown out but is still quite good, and then clean it and cook up a feast with it. Their message is that modern Spaniards waste far too much food. When I asked him whether he was surprised at the amount of food they manage to scrounge every week, he said that he wasn't . . . because he and his wife end up throwing out a lot of their own food, too! And when I asked him why, he said, "With both of us working full time jobs, it's easier just to buy more than we need than to make a meal plan and follow it."

So that's another part of the big picture. The food industry is "allowed" to exist in its current state because if it didn't, it would be too hard for two-career couples to exist.

Sheila said...

Exactly. As a society, we've abandoned home for work ... with the result that no one is there to take care of the myriad things that need to be taken care of at home: meal planning, cleaning, home cooking, laundry. As a result, we spend more and waste more.

Anonymous said...

That was interesting--I hadn't known about the tax write-offs for transportation.

Do you know of any organization that fights against such cases of "dozens of tiny regulations" systematically and consistently?--or, for that matter, who collects them and lists them? I feel sometimes like, while one can find people who have made overregulation in a particular sector (say, finance) their thing, no one is particularly concerned with the thousands of tiny weed-like regulations sprouting anywhere.

Or maybe it's just that the information I get about it keeps coming from different sources... i.e., a bit ago I heard about how the government helped crush more local economies by heavily subsidizing railroads from, of all things, a Marxist historian concerned with showing that Randian railroad entrepreneurs were not the norm. (I wonder about how massive interstate highways have distorted what would be a free market and local economies, by effectively decreasing the cost of transportation for larger groups... of course, someone [the federal gov?] has to build roads so I guess I shouldn't complain too much...)

~James T

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