Farming Magazine - May, 2010

COLUMNS

Opinion: Agricultural Angst, Asian and American

By Martin Harris Jr.

Following the advice of the incumbent alpha-male, Chicago-trained, top White House staffer, I’m compelled to regard the recent Wall Street Journal near-full-page article on the declining prospects of agriculture in India, as “a crisis too good to waste,” because it carries such vivid lessons for agriculture in the U.S. Although India is a Third World country striving to become First World, and the U.S. is a First World country striving to stay that way, the ag sector in the latter can learn a lot from the February 23 article from its uncritical account of the way Indian government views its own ag sector. It illustrates, with unusual clarity, parallels with the way American government views its ag sector, much of which is usually concealed by shields of plausible deniability. The article should be read in conjunction with “The Power of Productivity,” a William Lewis book with case analysis of productivity in various domestic economic sectors in various nations, one of which is India.

There are differences, of course, and the largest one is the 70 percent (WSJ statistic; Lewis cites 60 percent) of the Indian population connected to agriculture, most of it at near-subsistence levels. That compares to less than 1 percent in the U.S., none at similar subsistence levels. Closely related is the productivity difference: in the U.S., the (mostly) free-market economy recognizes productivity advances in, say, industry, (although markedly less so in agriculture) by rewarding its creators; in India, the fear of civil unrest via the ensuing increased unemployment is so intense that, as Lewis describes for the construction industry, head-baskets are governmentally favored over wheelbarrows for earth-moving purposes. In the U.S., there aren’t many real farmers left on the land to be moved to industrial jobs in the cities, as was the official U.S. policy goal as recently as 1962 in the USDA-sponsored Committee for Economic Development report policy proposals; However, in India, there aren’t enough urban jobs into which even a tiny percentage of the rural population can move, so the problem becomes one of keeping them in the near-subsistence-level farming they want to escape. (Note to Wendell Berry and similar academic acolytes advocating for their own notion of “subsistence ag:” without a back-up pension or trust fund, it doesn’t furnish a pleasant living standard, by normal Western standards.) As in the U.S., the Indian government sees its policy role as one of brilliantly figuring out how ag can best be harnessed (a little ag analogy, there) to service the more important urban sectors; in the U.S., that historically meant shifting labor resources from field to factory, and in India, it now means keeping the farm population from seeking urban employment.

To this end, the WSJ article explains that the Indian government has throughout recent history subsidized fertilizer costs so the urbanite minority could enjoy (relatively) cheap food and so that ruralites wouldn’t quit their two-acre land patches in economic despair (and urban food supplies wouldn’t shrink, with concomitant consumer price increases). The headline says it all: “Green Revolution in India Wilts as Subsidies Backfire.” Deep into the article you can read that the Indian government has designed its subsidies to fertilizer manufacturers so as to guarantee them a 12 percent return on investment (just as U.S. state governments similarly guarantee 10 to 12 percent ROIs to regulated public utilities) for reduced-price sales to farmers; however, just as in the U.S., there are no similar ROI guarantees for the actual food-producers.

Unlike the U.S., where farm-household income is now primarily subsidized by town jobs (and thereby subsidizing the crop-production effort), India’s farmers have few urban job opportunities, which leaves them with the no-shoes-for-the-kids subsistence model first admired in print by the Vanderbilt University professors and poets of the 1930s who called themselves the Southern Agrarians. For different reasons—in the U.S., for price and variety, and, in India, for starvation-prevention—both countries import about half their food desires or necessities, but in India, the money sent abroad for basic commodity import is a serious detriment to the more pressing government goal of achieving First World status by offering subsidies toward growing the most advanced urban economic sectors, like the attraction of U.S. data-processing firms for services ranging from call-centers to software-design. Meanwhile, as the article makes clear, the Indian government cares not about crop-producer profit (and commensurate standard of living) but all about crop production yields-per acre. Like the U.S., but unlike the now-deceased Soviet Union, the modern India doesn’t keep farmers away from urban jobs by means of rigidly-enforced internal passports, and therefore must tweak farm earnings by means of various subsidies carefully set just high enough, and pay for urban jobs like construction held just low enough, to keep the farmer quit-rate low. Unlike the U.S., where the agriculture “problem” has historically been one of ag-sector economic distress caused by land and crop surpluses and ensuing low crop prices, India’s ag problem has historically been one of real shortages, real starvation and real all-sector damage to the overall economy and even national stability (which, for a separate set of reasons, has compiled a dismal historical record).

Unlike the U.S., India has very real ag-sustainability problems, the Journal reports, describing how artificially cheap chemical fertilizer over-use has damaged soils and yields nationwide, and declining water tables and increasing soil salinization make a second Green Revolution essential, but improbable. Yes, the U.S. has some parts of the Ogallala Aquifer in water-table trouble, and some parts of California’s Imperial Valley in soil-quality trouble, but the U.S., overall, is still trying to incentivize farmers to retire farmland, as per-acre yields continue to increase. In India, basic food commodity import costs are sharply up, and to find the extra cash, the government has responded by ending subsidies on all fertilizers except urea, which is now, government experts warn, “being over-used.” Reporter Geeta Anand offers an interesting historical note regarding the first use of Norma Borlaug’s Green Revolution wheat seeds in 1967: “These seeds required chemical fertilizers to maximize yields. The challenge was to make fertilizers affordable to farmers who lacked the cash to pay for even the basics—food, clothing and shelter. Back then, giving cash or vouchers to millions of farmers living all over India seemed like an impossible task fraught with the potential for corruption, so the government paid subsidies to fertilizer companies, who … agreed to sell at prices set by government.” As in First World nations, Third-World hopefuls find it useful to route cash to urban commerce, but not even vouchers to rural farming, to guarantee positive ROIs to manufacturers but not even parity to growers, to view the primary sector of the economy as servant to the secondary, tertiary, and of course quaternary (governmental) sectors.

Unlike First World nations, Indian Web site ChilliBreeze reports, food spending there is at 50 percent of consumer purchasing power; it’s below 10 percent in the U.S. and hasn’t been at 50 percent since the 1880s. You have to go back to the 1840s to find a decade when farmers were 70 percent of the U.S. labor force.

These fundamental stats illustrate the problem facing a government that lacks the resources to increase productivity in construction, much less agriculture, and dares not increase the urban job-seeker pool even if it could grow productivity. Like First World nations (which have achieved that standard of living via productivity increases) India is enthusiastic about deficit spending to increase urbanite purchasing power, particularly during economic downturns, which explains why a 12 percent ROI to fertilizer companies so they can pay their employees more generously is OK; India is similarly unenthusiastic about paying enough for crops to increase farmer purchasing power so that the ag sector can become customers for urban goods and services (like shoes for their kids). If it were (subjunctive contrary to fact) my economic decision, I’d take just that course in both First and Third World economies, particularly in the latter, like India, where urbanites wield only 30 percent of the vote and, therefore, can’t dismiss politicians who raise their food prices enough to make farming profitable and thereby increase purchasing power for the other 70 percent.

Logic argues the opposite: increasing the rural market, now nearly nonexistent, for urban goods and services, would economically benefit both population sectors. Such a strategy wasn’t, as you might expect, mentioned in the WSJ article, as either an Indian government option or a reporter’s conjecture. However, it never shows up as a specific purchasing-power stimulus-option in the long history of farm economics in this country, either. Here in the U.S., the efforts of the National Organization for Raw Materials to popularize the basic economic thesis of wealth-creation in agriculture then spinning off, via improved ag purchasing power, into wealth creation for vendors of urban goods and services, has never achieved widespread acceptance, even though the actual economic statistics show some pretty clear empirical evidence of what NORM calls the one-to-seven trade turn, meaning that a dollar earned through food producing in the primary economic sector then re-circulates seven more times in the food-consuming sectors. Curiously, a U.S. national government which argues for a “multiplier effect” when it deficit-spends to create urban jobs, disdains the identical concept when it’s called a “trade turn,” even though the statistics for the Keynesian multiplier effect are nonexistent and the statistics for the trade turn are there for the reading.

In the Lewis book you’ll find the ag productivity stats, which show India at 1 percent of U.S. levels, for a number of reasons ranging from farm size to tractor cost to labor cost to—perhaps most importantly—the uncertainty of land ownership. Fifth Amendment property rights disputes in the U.S., like the now-20-year-old one in which Nevada rancher Wayne Hage famously said that “If you can’t own (and use) property, you are property” (he died before his estate finally achieved a multimillion dollar court award from his federal tormentors) are rare indeed compared to India, where land titles are always uncertain and governmental takings unpredictable. In “The Power of Productivity,” Lewis argues for land title certainty, but doesn’t show how a government like India’s would want to comply, nor does the WSJ article even raise the question, although, as in all the failed states of Africa, formerly high-productivity colonial ag producers, have since collapsed over just that weakness, and the parallels ought to be obvious.

Finally, in the “Brace for Impact” book by another Lewis (Thomas) discussed in this space last month, there’s a proposal for the U.S. to move its land occupancy and food production to just the sort of mini-farming practiced by just about everyone on 1 to 10-acre plots as already exists in India, presumably (he doesn’t say) with a higher productivity level, but without (he does say) the present range of existing urban-center manufacturing, which won’t be there to furnish cultivators or overalls. I won’t even open a discussion of how it has been super-high productivity in American farming, which has created the individual wealth levels, often passed on to no-job-needed inheritors, enabling today’s non-farmer citizens to consider seriously going back to the land on mini-farm plots, but with back-up trust-funds and pensions, just like those brave subsistence-ag pioneers in the Thoreau, Nearing and Berry families.

The author is an architect and former farmer. Comment or question? Visit www.farmingforumsite.com and join in the discussions.