Free Markets, Free People


Crop cronyism’s destructive results

We talk about it.  Politicians condemn it.  Nothing ever happens to change it though.

This year’s agriculture bill again redistributes your money to rent seekers:

Combine a Midwestern drought with pointless ethanol mandates, and the supplies of corn inevitably dwindle, driving prices sky high. Politicians like Sen. Claire McCaskill, Missouri Democrat, are citing the crop crisis as an excuse to ram through a near-$1 trillion farm bill. While a bit of that cash might find its way to a small farmer, the bulk of the loot will be transferred to individuals who are anything but poor. Like the bank bailouts and TARP, the farm bill illustrates the capture of the legislative process by special interests.

The last farm bill in 2008 was the focus of $173.5 million in lobbying expenditure, according to a report released Tuesday by Food & Water Watch. This is all money spent on what the Mercatus Center’s Matthew Mitchell calls “unproductive entrepreneurship” where people are organizing and expending their talent to become rent seekers, and the end result is wealth redistribution, not wealth creation. Real entrepreneurship innovates in ways that are socially useful. Cronyism diverts resources — both money and talent — into a system that rewards privileges to favored groups. In the case of the 2008 farm bill, recipients of subsidies of $30,000 or more had an average household income of $210,000.

Mr. Mitchell argues that “government-granted privilege is an extraordinarily destructive force” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.”

She’s absolutely right.  And, of course, when you mess with markets, like has been done with the corn market and mandated ethanol, the expected results occur when something unanticipated, like a drought, happens:

Corn and soybeans soared to record highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008.

Corn prices crossed into uncharted territory above $8 per bushel — about three-and-a-half times the average price 10 years ago of $2.28. Soybeans punched past $17 for the first time — also three-and-a-half times the 2002 average.

Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline.

Notice what entity is mentioned in the last paragraph?  Yes, government. A key player in the increase in corn prices (yes, understood, they’d be higher with the drought alone, but government’s ethanol mandate has driven them even higher yet).

Meanwhile, as mentioned above, we’re subsidizing agriculture to the tune of $1 trillion dollars of your money (in cash or in debt to be paid back in the future).  Meanwhile, you’ll be paying more for corn based products at the grocery store as well.

Nita Ghei lays out the bottom line problem with this sort of cronyism and rent seeking:

Government privileges come in many forms, direct and indirect. It might be a monopoly, such as the one granted to utilities like Pepco. Regulations such as licensing can be used to limit entry to a particular field to the benefit of existing businesses. Lobbying and the revolving door in Washington create what economists call “regulatory capture,” which is what happens when existing firms use regulatory agencies to benefit themselves. Tax breaks, loan guarantees and subsidies are the most direct signs of a government’s favor. Bailouts of big banks under TARP, and Fannie Mae and Freddie Mac when the housing bubble burst, are the most recent examples of direct action.

Extending each of these privileges reduces America’s economic competitiveness. A monopoly protected by the government has little incentive to provide good service. The greater the availability of privileges, the greater is the incentive to indulge in rent seeking, which diverts resources from truly productive activities. In the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share.

The greatest scourge to the honest Midwest farmer is not unfavorable weather, pestilence or disease. Far worse for them is the plague of politicians who create an artificial market in which only those with influence can truly compete. Defeating the budget-busting 2012 farm bill is the best chance at a good harvest.

The chances of that happening, however, are slim to none.  Regulatory capture is as common now as government debt and unemployment.  It is a systemic problem that rewards rent seekers and the well connected to the detriment of innovators and competition.  It is the antithesis of capitalism.

Unless we have the will to stop this sort of cronyism, we’re on a short road to failure.  This is another, in a long line of government programs, that are unsustainable, destructive and just flat something government shouldn’t be involved in.

But my guess is, this time next year, we’ll still be talking about it, politicians will still be condemning it and nothing will change except the higher national debt number.

~McQ

Twitter: @McQandO

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19 Responses to Crop cronyism’s destructive results

  • Farmers target a certain production level of corn.  If ethanol was not part of the picture, that much extra corn would not be grown and we would be just as down in production just the same now as then. 

    If anything, if we grew corn to help blend with fuel in normal years, and then in years of drought removed the requirement so that portion would be returned to food and replaced with just more gas or a different additive, that would be the best strategy to cope with drought. 

    • The whole point is we shouldn’t even be discussing that … it should never have been mandated.

    • Farmers target a certain production level of corn.  If ethanol was not part of the picture…

      the markets would not have been distorted in the first place.  Seriously…!!!

  • I’ve held for several decades now that there should be no such thing as “agricultural economics”.  I think the only reason there is such a discipline is the level and history of government entanglement in farming and ranching.
    Partly, this comes from the American agrarian myth, and a lot of it comes from the powerful populist movements in and before the Progressive Era.
    It is HIGH time to scythe it all down.

    • In the Myth of the Rational Voter, food security is one issue where many people get really irrational. Thus subsidies.

    • A deflection post of an idiot story by an idiot.
      Huh.  I think that fits the definition of “trolling” very nicely.

  • Is it just my eyes or are the three quoted paragraphs in the middle repeated?

  • Legislators will never change the system voluntarily, it’s simply too good to them, and it is the system that they know how to navigate. Were it changed, people who had the skills to navigate the new system would overwhelm the current species of politico.

    The only way that this can possibly changed is a popular movement that crosses ideological lines.

    Left and right see the same thing, they both know the problem, and normal people, outside of the system, all want to stop it. The left calls it money in politics, the right calls it government overreach, but it’s the same problem.

    The solution, ultimately, is building a firewall between government and special interests. Every American, including corporations and unions, do and should have the right to petition their government. What makes the status quo FEEL corrupt to most Americans is the exchanging of cash (and I do mean exchanging, since Pol 1 gets campaign dollars and lobbyist gifts, and contributor B gets government money, regulation, deregulation, or other forms of capture) in the formation of policy.

    My best guess is that several hundred billion of taxpayer dollars are gifted to benefactors in one form or another, and my soluton is to use a single digit billions every year to allow Pols to make decisions based in the content of petitioners argument, not their cash.

    I would gladly join with conservatives to make this happen, and it will hurt historically favored cash petitioners on both sides, but ultimately, keeping the right fighting the left assures the status quo, which hurts us all far more than the marignal differences between the parties could possibly help us.

    Maybe Billy Beck was right, that even participating in this system makes one culpably corrupt.

    • My best guess is that several hundred billion of taxpayer dollars are gifted to benefactors…

      But it never occurs to you that the fact that the CENTRAL government HAS hundreds of billions to bestow is the root problem.
      You need a beating with a clue-bat.

  • “But it never occurs to you that the fact that the CENTRAL government HAS hundreds of billions to bestow is the root problem.”

    Of course it occurs to me, but apparently it does not occur to you that the particpants of this corrupt will EVER let that money go away because in those massive numbers is where they hide their (legal) graft.

    Einstein said that the definition of insanity is doing the same thing over and over again and expecting different results.

    We have been electing small government conservatives for two decades, and they have done nothing but grow government.

    You are an ideologue, a supporter of the problem by supporting the partisan fighting that maintains the status quo. I lay down my partisan ideals in favor of common cause, to put a system in place that would allow your small government conservatives to actually enact policies in line with their ideology. As I have said, although I am politically left of center on some issue, I would rather have an honest conservative making policy I don’t like than a dishonest liberal pretending to make policies I do like while they are really gifting to their benefactors. The converse should be true of consvertatives if we are ever going to address this problem.

    • Of course it occurs to me, but apparently it does not occur to you that the particpants of this corrupt will EVER let that money go away…

      What a stupid lie!  Who lets power go away without a fight who controls it?  Nobody has ever hear me say such a stupid thing as they will “let that money go away”.
      I understand how power works.

      The solution, ultimately, is building a firewall between government and special interests.

      Oh, now THAT is a brand new, novel notion unique to you.  What a jerk!  How often has THAT been talked about?  How often have you seen laws passed to do that?  Has it EVER worked?  Except to make it harder for ordinary people to effect their central government, that is?
      And we know that one person’s special interest is another person’s vital citizen’s concern.
      And you ARE aware that this whole…I’M not ideological; I’M only interested in pragmatic solutions…BULLSHIT is a known, diagrammed and documented ploy of Collectivists.  RIGHT???
      Who do you think you’re going to kid, you putz?

       

  • a known, diagrammed and documented ploy of Collectivists”

    Boo! There’s a commit conspiracy everywhere… maybe you think it’s the Jooooos.

    You are a fearful, fearful person, and will never be part of any solution, more likely to fight tooth and nail against it.

    (Insert large big spending organization whether it be corporate, union, or other) would still have a very big voice without spending a cent, all they would lose would be the leash that they use to create policy.

    Face it, you are a prisonder of the status quo and will continue to vote for the most conservative candidate for the rest of your life, hoping you will get a unicorn and a different result.

    • Face it, you …will continue to vote for the most conservative candidate…

      But you said you would…

      I lay down my partisan ideals in favor of common cause, to put a system in place that would allow your small government conservatives to actually enact policies in line with their ideology.

      And you also said…

      I would gladly join with conservatives to make this happen…

      Which…I dunno…makes me think you are a big, fat liar.  Trying to dupe people.
      Dinnit work, did it…????

    • There’s a commit conspiracy everywhere… maybe you think it’s the Jooooos.

      Most collectivists these days side with Palestinians and other anti-Israelis, ignoring the rampant anti-Jewish hatreds endemic to many protest groups operating in the West.
      And, “neocon” is often an derogatory code-word for Jewish Republicans/”conservatives”.
      Finally, if you look at politics in Israel and amongst Americans of Jewish ancestry/religion, you’ll see a wide array of viewpoints, not all that different from the population of the US taken as a whole.  For a “conspiratorial group”, they sure do camouflage themselves as ordinary people quite well.
      Oh, but you didn’t really believe that…tossing that little prejudice card was a way to derail the debate.

  • “Which…I dunno…makes me think you are a big, fat liar.  Trying to dupe people.
    Dinnit work, did it…????”

    Wow, I actually did laugh out loud at that. The webs you can create in your mind are entertaining, and possibly symptomatic of a serious issue.

    I won’t be voting. I do have policy preferences, but they are pointless in a system where the pleasing of the benefactors is the primary driving force.

    I think Obama is better than Romney, but ultimately, in the current system, that doesn’t amount to much more than preferring the color blue over the color red.