We have a history of farmers max producing. It’d be nice if individuals could sit down and do a proper calculation and weigh the cost/benefit/risk of how to use land over the long term horizon, but most people don’t actually do this calculation. A lot of times, people will say, “I need the money right now, and I’ll worry about the consequences later.” Although, even that may be a proper cost/benefit/risk calculation to make for a particular circumstance.
If you want to ensure that fields lie fallow periodically, then you have to regulate. If you want to keep prices above a certain floor, then you have to regulate.
On another note, it’s very easy to bash FDR, but you have to remember what was going on during the Great Depression. The chain of agricultural production/distribution/consumption had broken down. So you had harvested crops rotting while people were going hungry. We’ve amassed (and apparently forgotten) a lot of economic knowledge since then, but in the 30s, they really didn’t have the same tools that we do now to fix a problem like that. It’s easy to say in hindsight that this particular program or that particular program was ineffective or wrongly tailored.
Unless, of course, you think it’s a good outcome to have crops rotting while people go hungry. But for me, that’s just a recipe for all sorts of nasty stuff (like revolutions and riots), so I’d prefer to find a fix for that.
Farmers produce big this year because they don’t know what will happen next year. It could be a flood, or a drought, or a new strain of avian flu that wipes out egg production for a couple of years.
Producers may decide the cost/benefit ratio may not justify max production (trying to squeeze too much out of marginal land, investing in new equipment and facilities, switching to a higher priced but higher cost crop, etc.) but that’s an individual decision, not one the industry makes as a group.
If the sugar beet industry is out of business, somebody better tell a bunch of guys in northern Michigan. We still grow a lot of beets here, there is a quota system, you have to buy shares in the coop to be in the business.
I am of the opinion American farmers from the 1890s to the 1940s were not inundated with offers of cheap money, and needed no restrictions to save themselves from borrowing overmuch.
And had they done so, looking south to what finance capital did to the sharecroppers ought to have dissuaded them.
You’d think so, but I suspect there’s a sort of “Tragedy of the Commons” situation going on- some guy in Wisconsin assumes that he can produce as much corn as he can, because he needs to pay his bills, and figures that the market can absorb it, or that his tiny increase won’t make any difference. Multiply that by thousands of farmers, and you get a recipe for mass bankruptcy.
So the government pays these guys to NOT grow, so that they can keep the prices high. It even helps foreign growers; guys in developing countries can take advantage of the higher prices instead of getting plowed under by American farmers producing as much as possible and also with some sort of comparative advantage due to better land, better equipment, better fertilizer, better cultivars, etc…
This is not the tragedy of the commons it is cartel behavior. It is every business’s best interests to keep the prices of their products high. It is in every consumer’s best interest to keep the prices low. Government programs to keep prices high are a conspiracy against consumers. Since poor people spend a greater percentage of their income on food they are the ones hurt the most. Not surprisingly, farm subsidies and mandatory cooperatives are ways that government helps the rich and powerful at the expense of the poor and unorganized.
FDR’s solution was to have those crops destroyed instead of rotting. So when one third of the country was out of work and desperate for food the government destroyed food, paid farmers not to plant food, and tried its best to keep food more expensive. It was criminally stupid and hurt millions of people.
Except where it is necessary for environmental/agricultural sustainability, paying farmers to not produce product is fucking stupid. Why does it matter if the farmers drive the price down if you’re already just handing them wads of cash regardless of what the market says? Just keep handing them the same wads of cash, but demand that they give you crops in exchange.
Increasing the efficiency with which we turn inputs like land and labour into outputs like food is a good thing, not a bad thing. Promoting inefficient farming methods does not produce real wage growth, it produces inflation.
But if you rob Peter to pay Paul, the one you can count on to support you in the next election is Paul. Especially if you are taking just a little from a lot of Peters, so they don’t notice.
Food is cheap in the US, so people don’t much care that prices are higher than they would be if the government didn’t spend money maximizing profits for Archer-Daniels-Midland.
The fundamental problem is that individual farmers have limited control over how much they actually produce (given weather, etc.) and so the agricultural market never really works like it should along simple supply-and-demand lines.
The necessity of paying farmers not to grow or buying and destroying crops or taking crops and using them as food aid or whatever is this: if you just let the prices go wherever the free market takes them, you’re eventually going to get a feedback cycle like bump describes where prices are tanking but individual farmers have to up production to cover their expenses. That leads to price crashes and mass bankruptcies, which means farmers no longer working the land. What do you think that does to food prices over the next few years?
The government has to meddle with crop prices somehow if we want a dependable food supply. Just paying subsidies to cover the price difference is a really bad idea because it’ll actually make the oversupply problem worse, so it’ll get really expensive really fast. Destroying crops obviously wasn’t popular, and the whole “lazy farmers getting paid not to farm” meme has made that approach not much more so. The approach of taking part of the crop and using it for food aid seems to be generally politically palatable, but with globalization the number of markets that can truly be called “non-competitive” is fairly small.
It’s a difficult issue, and there’s lots and lots of room for criticism of the specifics of how the government handles it, but the general necessity for agricultural price control programs is absolutely there.
The idea is that the government takes it and distributes it in “non-competitive markets” which often means outright food aid, or selling it through diplomatic channels to places like Cuba or North Korea (or historically the USSR was a big one) where US farmers aren’t allowed to sell directly. In theory it should reduce supply because those weren’t places American farmers could sell directly and so in terms of the crop price it has an identical effect to just destroying that amount of crop.
Now, whether that’s how it was actually working these days is certainly up for debate. Like I mentioned above, the problem is that these days the number of markets that are truly “non-competitive” are pretty small.
Another difficulty is that in those competitive but chronically under-fooded markets, food aid can drive out what few poor farmers there are because it changes the supply-demand equation in those countries. It may be another story in countries that experience a temporary famine and who also are politically stable enough to allow safe, non-corrupt delivery of food, but the combination of all three factors rarely happens.
I’d say it would still benefit raisin farmers, but that’s not going to stop a lone wolf from stigginit to the Man, and screwing over the entire industry in the process.
Yeah, these price control programs undoubtedly benefit farmers as a whole.
Since we’re in GD, I might suggest that this could be yet another reflection of the inexplicable success the Republican Party has had moving American farmers to the right politically, against their financial best interests. I imagine the fact that the bad old days of the utterly dysfunctional pre-New Deal agricultural economy is now passing from living memory might be part of it too.