Transcript The Future of Alabama Agriculture

The Changing
Structure of
Global
Agriculture
The New Cowboy Economy
“… The world is going to have a global
economy without a global government.
this means a global economy with no
enforceable, agreed-upon set of rules
and regulations, no sheriff to enforce
codes of acceptable behavior, and no
Judges and Juries to appeal to if one
feels that justice is not being done.”
Lester Thurow
Economics of Wealth Creation in
the Global Economy
• Businesses bring Labor and Capital together to
create “wealth” or profit
• How is wealth distributed in the global economy?
• The “investor class” increasingly capture wealth
that is created …
• With less and less going to the “working class”
• Profits increasingly flow to financial centers, and
not to rural areas
The Deadly Combination
 Horizontal concentration
 Vertical integration
 Interlocking spider web of directorates, subsidiaries,
joint ventures, strategic alliances, and partial ownership
of other agribusiness firms
 No real structure to the global economy
 Only “Imposing facades” Thurow
 No global antitrust laws or police
 Dated domestic antitrust laws
 Increasingly narrow interpretation of domestic antitrust
laws
 External (community) costs
Early Antitrust Interpretation
“[I]t is not for the real prosperity of any country
that such changes should occur which result in
transferring an independent business man . . . into
a mere servant or agent of a corporation . . .
having no voice in shaping the business policy . . .
and bound to obey orders issued by others.”
Justice Peckham one of the first substantive
decisions interpreting the Sherman Antitrust Act
(from Carstensen)
Independent Businessmen?
• Many of us admire the fierce independence of
farmers and farm families
• Are farmers really independent any more?
• No!
• They are increasingly puppets of the corporate
world
• Their independence has hindered actions for them
to band together to “countervail” corporate power
Free Markets?
“There isn’t one grain of anything in the
world that is sold in a free market.
Not one! The only place you see a free
market is in the speeches of
politicians.”
Dwayne Andreas, CEO of ADM
Is the Global Food System Out of
Control?
Our present economic system has emerged
without any apparent forethought about
what kind of economic/social system citizens
want
 Change has been driven by corporate interests
 Fathers of a competitive market economy recognized that
there is an inherent instability in the system:
A competitive market economy may evolve, through
natural growth, acquisitions or mergers, to monopoly
Unless the market is regulated
Antitrust laws were intended to prevent this outcome
 Contract production is part of the corporate mindset
Global Cowboy Economy
• Economic survival is possible in niches
• Economic survival is possible with great size
(power)
• Mid-sized firms will find it very difficult to
survive
• High returns to knowledge and innovation in
a knowledge-based industrial revolution
• Where and how profits are made is changing
rapidly
Giant Corporate System
• Big business is not necessarily bad, but
• An imbalance of market power or economic power
often leads to abuse, which is bad
• Concentration was initially driven by economies of
size, which do not include costs imposed on the
environment and on rural communities
• Concentration is now driven more by attempts to
gain raw economic power than by economies of size
• Corporations are more concerned about immediate
profit, rather than long-term conservation and
stewardship
• Increasing control of food production technology
Lost in the Fifties
Small and mid-sized producers of “commodities”
selling on the cash market
• Returns will likely be dismally low, at best
• Some markets are disappearing with vertical
integration
• Many markets thinning due to contracting
– Less accurate and more easily manipulated
– Partial vertical integration transfers risk to what
remains of the market
• Markets are increasingly manipulated by giant
transnational corporations
Traditional Family Farms
• Growing size
• Attempt to compete within the industrialized
system
• Some may produce bulk commodition, while
others will produce identity preserved products
• Even with large size, they cannot countervail the
market power of buyers of their products, or the
market power of input sellers
• Thin profit margins
Giant Corporate System
• Participation in commercial production agriculture
is increasingly “by invitation only”
– Who will be invited?
• Independent, outspoken, astute businessman and
entrepreneurs?
• Or Servile, submissive, not particularly astute businessmen?
• The free market allows for cultural diversity in the
production system; the evolving global food
system may not
• Are a few CEO’s through their economic and
political power becoming the “social planners” for
the world?
Sustainable Agriculture
• Must “develop” markets—can’t “drive to” them
and sell on a cash market
• Develop Infrastructure
– Network (much more than a chat room)
– Business Organization (must develop countervailing
power)
• Closed Co-op
– Quality assurances; dependability essential
– Entrepreneurial training for farmers
• Must connect with the consumer and the
community
• Environmental sensitivity
• Predatory pricing laws must be enforced
Sustainable Agriculture
• Focus of the movement has been on
developing and implementing a
sustainable food production system
• We also need to give thought to
developing a sustainable economic
system
The Well-being of Society Depends on
Maintaining a Balance Of
Economic efficiency
Economic power
Economic freedom
Stewardship of natural
resources & the
environment
Community
The Interface Between Law, Politics & Economics
Food for Thought
“… Europeans have a broader view of
the farmer’s job description. In addition
to producing food, the European farmer
is expected to play a significant role in
supporting rural economies and in
protecting the environment.”
“This is additional work, and it requires
more farmers, not fewer.”
Food for Thought
“… in spite of new teaching technologies,
we continue to prefer smaller class sizes
and more teachers”
“But somehow the language of teachers
… does not apply to farmers in the U.S.”
“Surely, the best of farmers cannot do as
much for the environment when they are
responsible for 2,000 acres instead of
200, or 500 dairy cows instead of 50.”
Food for Thought
“And no one thinks rural communities
will be better off if we pursue a policy
that basically ‘lays off’ good farmers and
asks them to move elsewhere.”
“We should be talking of farmers the
way we do teachers, nurses, and other
providers of services we all value.”
“We would be better off with more
farmers, not fewer.”
Dr. Richard Levins