Cafe Hayek

On African Agriculture

My wife, Karol, helps clear up the confusion about the sources of Africa's agricultural problems.

Bastiatian Wisdom

Cafe patron David Descôteaux has this letter published on Saturday in Montreal's The Gazette:

Looking for help from Bombardier

Letter

Published: Saturday, July 26

I have a project: to publish a book. I have talent and I'm certain it will be a success. I ask each of Bombardier's 70,000 employees to lend me $25. I will repay the entire amount ($1.7 million) in 10 years. Of course, it will be a zero-interest loan. And I will pay you back only if I sell my books. If I sell nothing, you get nothing.

You refuse? But my project will create economic wealth. The publisher will earn a profit, I'll buy writing software, hire a research staff, buy paper, eat at restaurants near my house, hire a contractor to build me a decent office. Add the income tax of all these workers to the taxes generated by the sale of the books, and the government will make a fortune.

Besides, our book industry must be competitive. I heard that a French author, who writes on the same subject as me, receives subsidies from his government. It would be unjust and suicidal for our industry not to subsidize me, too.

You still refuse? You prefer to put your $25 in a safe investment, earning an eight-per-cent compounded annual return that will add up to $54 in 10 years, instead of the uncertain $25 I'm offering you? You say it's more important for you to keep this money for your daughter's college tuition than to use it to make planes? I don't get it.

But it doesn't matter what you think. You have no choice. My good friend the politician will make you lend me the money. If you refuse, he'll send you to jail. He thinks it's a good project. After all, who are you to know what to do with your money?

David Descôteaux
Le Gardeur

(A French version is here.)

Bastiat would be impressed!

Autarky is Bad Policy

University of Illinois law professor (and co-blogger with me over at Market Correction) Andy Morriss sent this superb letter to the Wall Street Journal:

Sirs,

Contrary to the impression left by your story on agriculture and trade (“Food Crisis Forces New Look at Farming,” June 10), higher commodity prices do not result in a repeal of the principle of comparative advantage. Trade benefits people and trade distorting subsidies do not. This simple truth seems to have escaped both the “experts” interviewed in the story and those doing the interviews as the story quotes multiple experts complaining that countries like Haiti are no longer self-sufficient in various commodities. But food is no different than any other good. In no case is autarky a welfare-enhancing public policy, as the disastrous example of Albania under communist rule ought to have demonstrated once and for all. Public policies built around subsidizing inefficient producers in agriculture will raise, not lower, the price of food in poor countries and divert scarce resources from other, more productive investments. The problem for countries like Haiti is not a lack of investment in agriculture but the existence of a predatory public sector facilitated by international institutions like the World Bank and IMF peddling the latest fad. Poor countries are poor because they lack secure property rights, free markets, the rule of law, and free trade. Sorting that out, rather than developing a new Five Year Plan for agriculture, is what will lift their people out of poverty.

Andrew P. Morriss
H. Ross & Helen Workman Professor of Law and Business
University of Illinois

Sweet Letter on a Sour Program

Here's a fine letter from yesterday's Baltimore Sun:

The letter from the chairman of the Sugar Cane Growers Cooperative of Florida was a painful reminder that the U.S. sugar program benefits only a handful of people ("Boost for sugar is good for city," May 23).

The current price of U.S. sugar is roughly 20 cents per pound. The price of sugar on the world market is about 10 cents per pound.

Any economist will tell you that the price of our domestic sugar is artificially inflated by strict regulation of imports, a commodity loan program that forces the government to buy up any sugar that domestic producers can't sell and production controls that make it illegal for domestic sugar processors to sell more than their government-assigned allotments, even if they have buyers standing in line.

By keeping domestic sugar prices so high, the current sugar program encourages companies that use sugar in their products to move their factories to countries such as Canada and Mexico where they can buy less-expensive sugar and then just bring the finished products back here.

If you owned a factory that made candy, wouldn't you jump at the chance to cut the cost of your key ingredient in half, especially if you could do so by simply relocating a few miles across the border?

Regrettably, Congress just passed a new farm bill that makes a sweet program for sugar growers and processors even sweeter.

And by mandating a new and costly sugar-for-ethanol program, the bill will require the U.S. Department of Agriculture to purchase surplus sugar for about 20 cents per pound and then resell it to ethanol plants for less than 10 cents per pound.

The sugar program has always been touted as one with no net cost to taxpayers. But this costly new measure requires the government to give away taxpayer dollars.

This would be laughable if it were not so outrageous.

Thomas A. Schatz
Washington
The writer is president of Citizens Against Government Waste.

There's No Farm Bill Like No Farm Bill

This letter of mine is published in today's edition of the Washington Times:

No farm bill is best farm bill

Among the jobs of any secretary of agriculture is to portray the administration as smart, fiscally responsible and in awe of farmers' goodness and wisdom. Secretary Chuck Conner tries to do his duty in "Farmers deserve better" (Commentary, yesterday).

But those of us who don't work for the Beltway circus should ignore the corny debate over the relative merits of the Bush administration's offensively expensive farm bill against those of Congress' obscenely expensive alternative bill.

We should instead tell our "leaders" that the best farm bill is no farm bill. There is no sound reason for government to subsidize farmers or to protect them from foreign competitors. Any farmer or rancher too incompetent to produce food that consumers pay for voluntarily should find other employment.

DONALD J. BOUDREAUX
Chairman
Department of Economics
George Mason University
Fairfax

And Think of the Horrors Unleashed by Penicillin!

Here's one of the most absurdly ridiculous lines that I've read in a long time; it was penned by Alexander Cockburn, writing in the November 5, 2007 issue of The Nation:

Line up some of the more notorious Nobel Peace Prize recipients, such as Kissinger, and if you had to identify the biggest killer of all it was probably Norman Borlaug, one of the architects of the Green Revolution, which unleashed displacement, malnutrition and death across the Third World.

Shameful, on so many levels (one of which is that this sentiment drains credibility from the bulk of this article by Cockburn, which attempts to expose Al Gore's hypocrisy).

(HT: Joe Mann)

By the way, Gregg Easterbrook, in his tribute to Norman Borlaug (from the January 1997 issue of The Atlantic) wrote that

Perhaps more than anyone else, Borlaug is responsible for the fact that throughout the postwar era, except in sub-Saharan Africa, global food production has expanded faster than the human population, averting the mass starvations that were widely predicted -- for example, in the 1967 best seller Famine -- 1975!   The form of agriculture that Borlaug preaches may have prevented a billion deaths.

And here's an earlier entry from here at the Cafe about Dr. Borlaug.

Monsanto Saves Lives

Want to know one way that a multinational corporation and the profit motive combine to save the lives of many Africans?  You can find out here.

Assistance Please!

I will soon begin writing a book on globalization.

As a consequence, I wonder if Uncle Sam will consider me to be a worthy candidate for "trade-adjustment assistance" -- that is, to pay me if I can demonstrate that I suffer from foreign competition.  After all, the world is full of superb, non-American writers on globalization, such as Johan Norberg and Martin Wolf.  The books these gentlemen have written, and will surely write in the future, might well reduce market demand for my book, causing me to earn less income than I would earn were I protected from the competition of these and other foreign writers.

Why shouldn't I apply for such assistance?  If being subjected to foreign competition entitles blueberry and lychee-nut growers, catfish farmers, and several bushels of other American producers to taxpayer money, aren't I also entitled to have my representatives on Capitol Hill pick Americans' pockets on my behalf?

I Have a Beef

I'm riding in my car this morning and I hear this ad for beef on the radio.  The voiceover is a quintessential cowboy voice.  It sounds just like Sam Elliot, the guy who played "The Stranger" in "The Big Lebowski."  He's talking about the primal experience of cooking meat on an open fire and then eating it.

The ad ended this way:

"Beef—it's what's for dinner.  Funded by America's beef producers with Chekhov dollars."

Chekhov dollars?  I know he wrote "The Cherry Orchard."  Did he also write "The Cattle Range?"  Naw.  I must have heard it wrong.   It must have been "check-off dollars."  That's weird, I thought.  The only "check-off" funding I know is on my tax return.

Unfortunately, there is another.

Actually, there are a lot of them.  There's a mushroom one and an avocado one and a potato one and a popcorn one and a lime one and, well, you get the idea.

I always assumed those ads were part of a coalition of producers that somehow evaded the antitrust laws.  Actually, it turns out that the Department of Agriculture creates the coalition by taxing the producers, then using the money to promote consumption.  Not surprisingly, how the money gets spent is a source of endless bureaucratic delight:

In accordance with the Beef Promotion Research Act and Order, the Cattlemen's Beef Board must contract with national industry-governed organizations to implement programs funded with beef checkoff dollars. The Beef Board solicits proposals from potential contractors through an annual Request for Proposal process. The Beef Promotion Operating Committee reviews proposals from contractors for programs to be pursued with checkoff dollars. The Board approves a budget, and the Operating Committee then chooses from the submitted proposals " or its amended versions of them " to determine the best use of beef checkoff dollars in the authorized areas of promotion, research, consumer information, industry information, foreign marketing and producer communication. Final approval must come from the USDA. This section of the Web site provides an overview of some portions of those programs completed with checkoff dollars, under the requirements of the Beef Act and Order.

While it's called a "checkoff program" which suggest it's voluntary, it appears to be mandatory in the beef business.  Each producer pays $1 per head of cattle.  A somewhat comprehensible description of the program is here.

Fortunately, the constitutionality of the program appears to be before the Supreme Court.  A history of the litigation is here.

I wonder how much of the burden of this tax falls on consumers.  What a great country we live in where the government helps raise money for farmers to use to convince us to buy their products.