Tag Archives: economics

In Favor of Small Farms

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Small farms are economic engines for the countryside. Large corporate farms are generally extractive industries.  The latter are employers of labor, such as machine drivers. They provide fewer jobs both on the farm, and in supporting small towns than the more numerous small farms they replace.

I’m undoubtedly biased, having seen the changes where my mom grew up in Wisconsin. It was on a small farm, on a county road lined by many small farms. All of the former parcels of land along the county road has been converted into one gigantic soybean field. There are two employees who live in town, and who commute to the machine shed each day they’re needed. They drive giant automated tractors all day long, and then go home.  There is no farm there.

Soybean field

Soybean field

The land is owned by, and the tractor drivers are employed by, some corporation that may not even pay income taxes in the state, since their corporate HQ is elsewhere. As a result of this kind of agricultural consolidation, small Wisconsin towns, near my mom grew up on the farm, as well as the small town father grew up in, are now almost ghost towns. They used to be busy with stores, churches, bars and schools providing for the now absent hundreds of small farms around them.

This isn’t simple pining for a life style that’s changed, or a time that’s gone.  I’ve never lived on a farm or in the country.  Instead, I believe there are significant benefits to society, the environment, the economy and the security of the nation in having numerous small farms, supporting numerous small towns, much like American of the early 20th century.

Aerial view of old farm

Family farm circa 1950

These changes were not necessarily inevitable, but were instead the result of government policies and unfettered capitalistic profit over everything behavior.  But it only works that way in the short term.  Long term, society suffers and then the economy suffers.

In addition to being economic engines, small farms – especially family-owned small farms – provide numerous other benefits.  When you know you will likely pass your farm onto your children, you’re inclined to take better care of the soil, preventing erosion and depletion and contamination.  When there are numerous prosperous small towns, there are more small business economic opportunities.

Those same towns also make community – the knowing and supporting the people around you – generally easier to achieve.  It’s not impossible in large cities, but it’s a lot easier to become a lost and isolated.  Not everyone is cut out for living in a big city, just as not everyone is cut out for living in a remote area.  More farms and more small towns provide a much larger variety of opportunities to fit the varying dispositions and habits of the humans making up society.

The extractive, end-stage capitalism of huge industrialized agriculture produces mostly negatives for society.  We should encourage a return to the more human-scale, more resilient, more anti-fragile benefits of small farms.

A Cautionary Tale

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On January 15, 2018, Carillion, a general contractor for an amazing array of work for the United Kingdom’s government sector, collapsed into compulsory liquidation.  The collapse calls into question the prospects of its 43,000 employees and 30,000 subcontractors, as well as the fulfillment of government contracts spanning three decades into the future.

Carillion’s fall also calls into question the entire political philosophy that it and other companies now operate under around the world.  It exemplified a way of privatizing government functions pioneered by Britain’s former prime minister Margaret Thatcher, and was then copied widely by other nations, especially America beginning under the Reagan administration.  Where once governments provided public services, they now contract them from private companies.  The argument is that doing so will subject moribund state monopolies to the competition and innovation of the market.

Carillion shows just how wrong-headed this argument is.  Not only are there the moral hazard[1] and rent-seeking[2] behaviors, but it is aggravated by the market’s unhealthy concentration.  It’s a similar situation in other privatization industries.  Only three companies operate private prisons in American and Britain.  Governments frequently contract for massive, long-term projects based on fewer bids than the average voter would use to renovate their kitchens.

The corruption, inefficiencies and lack of innovation blamed on government is even worse within these large companies providing government services.  There is also greed.  Carillion’s board ensured that the bonuses of its managers cannot be clawed back, even while the company was losing billions of dollars.  Carillion ‘wriggled out’ of payments into its company pension schemes as its troubles grew, while it carried on paying shareholder dividends and bosses’ bonuses.

Does this sound like a political model that is good for society and its citizens?

 

 

1. Moral hazard is the risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles.

2. Rent-seeking is the use of the resources of a company, an organization or an individual to obtain economic gain from others without reciprocating any benefits to society through wealth creation. An example of rent-seeking is when a company lobbies the government for loan subsidies, grants or tariff protection.

The Highway System is Going to Shrink

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Recently, the director of the Iowa Department of Transportation Paul Trombino made these remarks about the highways his department is responsible for in Iowa:

I said the numbers before. 114,000 lane miles, 25,000 bridges, 4,000 miles of rail. I said this a lot in my conversation when we were talking about fuel tax increases. It’s not affordable. Nobody’s going to pay.

… And so the reality is, the system is going to shrink.

There’s nothing I have to do. Bridges close themselves. Roads deteriorate and go away. That’s what happens.

And reality is, for us, let’s not let the system degrade and then we’re left with sorta whatever’s left. Let’s try to make a conscious choice – it’s not going to be perfect, I would agree it’s going to be complex and messy – but let’s figure out which ones we really want to keep.

And quite honestly, it’s not everything that we have, which means some changes.

Many DOT directors around the country privately admit to a similar kind of thinking, but Mr. Trombino is the first to say it aloud to the public, for which he should be lauded — and emulated.  Because the cold, financial truth is, we have way overbuilt our national roadway system compared to what we can afford or be willing to pay to maintain.  We’ve done this because as a result of a 60-year experiment with auto-oriented infrastructure, cheap money (borrowing) and faulty government policies and incentives that have aided and abetted this flawed idea.

For the last few decades, I have been become increasingly thoughtful about auto-centric planning and its profound impact on our nation’s infrastructure and urban development.  Many people never really think about our country’s decaying infrastructure until they blow a tire when their auto runs over a neglected pothole, but even the densest politician realizes our transportation infrastructure is broken.  Conventional wisdom suggests we should throw a lot of money at our decaying road, bridge and rail system to fix it.

I insist that no new roads should be built until the nation’s existing road infrastructure is fixed.  This may seem a little draconian given the fact politicians love to name new roads after themselves, but it’s become obvious that infrastructure planning over the past 60 years has revolved around the automobile rather than people.   Some would even suggest transportation planning was more of a social experiment than any real attempt to develop a limited but effective transportation system.

Regardless of one’s point of view, our current infrastructure planning requires quite a bit of rethinking.  Especially at the city level, we lost sight of what the infrastructure is there for — the people.

The indicator species of a successful city is not the automobile, it’s people.