COLUMNS
Opinion
Emptori Regnarent!

by Martin Harris Jr.

At first glance, the business news headlines are confusing. Dean Foods (U.S. largest milk handler) earnings are way down; Whole Foods (U.S. largest organic food retailer) earnings are way up. Wal-Mart earnings are down, but Lowe’s and Home Depot earnings are up. In contrast, Target earnings are way up (40 percent) and Sears’ are way down (39 percent). As the struggle for customer approval intensifies, McDonald’s successfully sells a more-expensive coffee in its fast-food outlets, but Starbucks can’t sell a less-expensive coffee very well in its own specialty shoppes. Relative retail newcomer Aeropostale is enticing discretionary purchasers away from old-timer Abercrombie & Fitch, market-watchers report. Per-household consumption charts of all sorts of things once categorized by experts as basic and immune to decline are declining: gasoline, vehicle mileage, electricity usage, even caloric intake of food and average square footage of new housing, but, equally destructive of professional economist predictions, household savings rates are up, as is a category the Bureau of Labor Statistics calls “nonfarm productivity.” BLS doesn’t chart on-farm productivity, maybe because the feds can’t agree on the definition of a “farm,” and maybe because the burgeoning grow-it-yourself movement is producing highly negative productivity numbers, by conventional input vs. output measures. At the national economic level, the 70 percent of Gross Domestic Product generated by consumer purchases, recently considered a “permanent” statistical benchmark, is down to 60 percent, about where it was in the early ’80s. Farmgate commodity prices are up almost 6 percent from last year, even as retail food prices are down slightly by the official stats, and down a lot more than “slightly” in my local shopping experience as I’ve commented earlier in these columns. The beyond-the-farm-gate food industry is eating (excuse the pun) the difference.

There’s the same pair of these-indicators-up/those-indicators-down commentary in the financial press: half the professional economist-columnist op-ed pieces worry about the coming of Weimar-Republic-style wheelbarrows-of-banknotes hyperinflation, while the other half, in mirror-image doom-and-gloom perspective, worry about impending Great-Depression-style collapsing-producer-and-consumer-activity deflation.

Similarly for the professional-economist-researchers, there’s now a new think-tank, the National Inflation Association, with a newly researched set of data points demonstrating that federal falsification of the Consumer Price Index has, by policy, understated by half the real inflation rate and the decline in producer and consumer purchasing power, over the last 40 years, by such devices as quantifying product “hedonic pricing.” Concurrently, the more traditional analysts avoid such recent phenomena as consumer preference-shift or selective price resistance; Mississippi State Professor C.W. Herndon, writing in Hoard’s Dairyman, for example, describes in near-full-page detail the inverse relationship between farmgate milk supply and producer prices, while never even mentioning sideways shifts in consumer demand from milk to cheese or the decline in overall per-capita fluid consumption, from 27g/year in 1980 to 22 today.

To all of the above, I’d add a nonstatistical, but personal observation, of once-farm semi-rural America in such widely separated areas as New England, Appalachia and the Ozarks: mostly rolling countryside not particularly suited to large-scale farm mechanization, endowed with not-particularly-good soils and not particularly well-equipped with large-scale commodity-handling infrastructure land, which was once intensively farmed, then nearly abandoned in the rural-to-urban job migration, and now, remarkably, showing a lot of new smaller-scale part-time crop and cattle-raising, presumably as economic counterpart to the typical county-industrial-park job base which thrives in two of the above three regions. Similarly for the regional smaller cities, as in Vermont’s Barre recently, urbanites in Tennessee’s Johnson City are now agitating for legalization of household poultry flocks. My conclusion: a whole lot of former consumers are turning into (at least part-time) producers. The 18th century Thomas Jefferson would be pleased to see his one-foot-on-the-land/one-foot-in-town model showing a 21st century renaissance.

As the new practitioners of the lawns-to-gardens movement (also known as edible lawns, grow-your-own and similar titles, tied in with such concepts as the localvore movement and the sustainability/self-sufficiency doctrine) will admit if pressed, the driving force behind this agrarian do-it-yourself trend isn’t entirely, or even predominantly, economics-based. The balance sheet shows red, not black, unless you don’t charge for such inputs as land, labor, tools, fertilizer or sometimes even seeds; the argument must be made (and it is) in nonfiscal terms: quality, purity, environment, exercise. An argument regarding seasonal item nonavailability can’t be made, and it isn’t. Such intangibles as social approval and admiration by others, self-esteem, pride, accomplishment and confidence are made, but less frequently. A point that’s avoided is that the home garden, as a “profit-center” only in non-dollar terms, worth doing for intangible rather than quantifiable reasons, is an affordable luxury to present generations, made possible only by higher wealth levels in terms of free time and land (or, for true urbanites, balconies) beyond the reach of our own mill and office-worker ancestors. The textile mill operatives in early 19th century Lawrence , Mass., had neither daily sunshine hours to invest in a private garden nor, living in a labor dormitory or walk-up three-decker, the few square feet of ground for the garden itself. It wasn’t until the late 19th century and the move to suburbia enabled by the new street-car lines that urbanites again had private gardens by choice as their (our) more distant farming ancestors had, by necessity. Their great-grand-children (us) are far wealthier: we (on average, since most are sub or ex-urbanites) typically have lawns convertible to gardens, the free time of a much-shortened work week to “labor” in one and the excess beyond-the-basics income to invest, without much expectation of dollar-denominated return-on-investment, in the range of tools, from little electric greenhouses to little garden tractors, supposedly needed to work even a relatively tiny veggie-patch with reasonable efficiency. And we have another form of wealth beyond the reach of the ancestors of most of us (you few who are descendants of royalty and/or inheritors of ancient wealth, not included); we enjoy the wealth of freedom-of-choice to engage in such avocations as not-for-immediate-profit gardening.

In that respect, the present transition from subsistence produce-or-starve farming to the free-time cultivation of organic specialties was foreshadowed by the transition of hunting from survival skill to seasonal sport, the transition of swordsmanship and archery from battlefield necessities to competitive games, the transition of rope-and-canvas sailing skills from merchant employment to regatta entertainment, or the transition of wrestling from tribal status-determinant to TV amusement. Some activities are part way along in this transition: think fishing, which is still part day job for some and part weekend challenge for others; or yes, farming, which is, on a global basis, mostly survival necessity in Third World countries, an essential day job or career choice in Second World countries and a mix of mostly professional entrepreneurship (commercial farming) with an expanding sub-sector of not-for-mere-profit grow-it-yourself practitioners in First World countries. In the U.S. and UK, for example, farmers’ markets flourish, catering to the high-end market sector spending so freely at Whole Foods; in Eastern Europe and the former USSR, farmers’ markets also flourish, under-selling state markets for minimum-price basics and offering their wares even as the state shelves are often nearly bare. They’re a survival necessity in the East, tolerated by government, and a luxury in the West, made possible by producers who are sometimes consumers, and consumers who are sometimes producers. Increasingly, in the food sector, you can’t permanently tell one from the other. The neat little phrase by the 18th century Scottish Economist Adam Smith, “the invisible hand of the marketplace,” explains half of this phenomenon, just as it describes the customer-choice-caused how (but doesn’t explain the customer-choice-based why) Home Depot and McDonald’s prosper while Sears and Starbucks struggle.

The other half of the growth (excuse the pun) in grow-your-own, I would argue, comes from the new American prosperity enabling such choices, even if they’re not “economic” necessities in the old-fashioned sense. The neat little chart by the 21st century Federal Reserve showing graphically how U.S. household net worth has grown from a few billion dollars at the end of WWII to more than $65 trillion today, while population has only doubled, explains how most American households now have the freedom-of-choice derived from wealth, quantified in land, free time and discretionary capital investment to engage in nonprofit grow-your-own. (Philosophical question: is a pricey but cute little garden tractor a consumer good or a capital investment? Long ago, when I bought my first Skil saw, the Sears salesman assured me it was the latter, and therefore quite OK.) Household net worth is famously variable, tracking everything from income to education, and, as some sociologists like to argue, class and race, and I don’t have the stats to prove my point, but maybe readers will accept my observation that the four upper-income quintiles are responsible for most grow-it-yourself, and the bottom income quintile, which supposedly “needs” it most, is noticeably least present on the ground. After all, the edible lawn slogan presupposes lawn ownership, and the local farmers’ market is pricier than the local supermarket. Customers (in either producer or consumer mode) get to choose when to be either or both.

Which explains why I used some schoolboy Latin–customers rule! in English–as the column header, to describe the pattern behind such seemingly conflicting trends as those I listed in the first paragraph. I could have written that “as wealth levels rise, producers and consumers have new freedom-of-choice in matters formerly dictated by resource limits and survival necessity,” but my Latin skills aren’t up to the task.

A Post-Script: even as I finished drafting this column, the nearest thing to an infomercial I’ve ever seen in The Wall Street Journal appeared in full-page-size in the May 24 issue. Headlined “Raise Your Prices,” it’s a pitch piece for their services by two Harvard Business School profs and one marketing consultant, inviting businesses to take advantage of the new customer wealth phenomenon by purchasing their expertise in bending the retail price curve upwards.

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