The Changing Structure of Global Agriculture

1. The Changing Structure of Global Agriculture

2. 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

3. 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

4. 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

5. “[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) Early Antitrust Interpretation

6. 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

7. 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

8. 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

9. 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

10. Giant Corporate System • Big business is not necessarily bad, but • An imbalance of market power or economic power often leads to abuse, whichis 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

11. Lost in the FiftiesSmall 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

12. 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

13. 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?

14. 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

15. 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

16. 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

17. 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.”

18. 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.”

19. 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