Pundit’s Mailbag — Food Prices
And Free Markets
Jim Prevor’s Perishable Pundit, June 3, 2008
Our piece entitled, Food Shortages? Blame Governments, focused on an article in The Wall Street Journal revealing that efforts to maintain small landholdings in the Ukraine were having an impact on food production in this country that was once the bread basket of the Soviet Union.
The gist of the piece was that laws precluding individuals from selling their land were also precluding the development of modern, efficient farming — and thus contributing to high food prices around the world.
The piece brought several letters including this one:
The capitalism vs. socialism discussion is easily polarizing, no? Using the Ukraine situation to explain the global food crisis, and to argue for free enterprise as the solution, does not convince me.
No free market advocate would argue that social and economic Darwinism is without pain and suffering; but staunch free market advocates would insist (perhaps correctly) that in spite of the hardships, the free market system is the best we’ve got.
If wealthy people can pay more for food to put in their cars than poor people can pay for food for their bellies, isn’t this just an example of market adjustments that happen to be very difficult and painful for some people?
I am horrified by this, as I think all of us are. But from my limited understanding, I see the free market being as much the cause as the possible solution.
— Bob Sanderson
We’ve been fortunate to gain Bob’s perspective on several issues. Among the pieces Bob has contributed to here at the Pundit are these:
Pundit’s Mailbag — The Acceptance Of Risk
Pundit’s Mailbag — Sprout Lessons Echo Food Safety Dilemma
Pundit’s Mailbag — More On Manure
Pundit’s Mailbag — The Tyranny Of Economics And The Goals Of Fairtrade
Pundit’s Mailbag — Can Irradiation Follow The Path Of Pasteurization?
Pundit’s Mailbag — A Look At Organic Versus Conventional Yields
Pundit’s Mailbag — Irradiation, Pasteurization and Labeling
Pundit’s Mailbag — Pesticides And Cancer
Bob always looks at the big picture and often comes from a different perspective — which makes us think more broadly and makes Bob a valuable friend.
In this case, however, we think the issue is less capitalism vs. socialism than a need to be aware of the law of unintended consequences or, even, the basic necessity of thinking through one’s priorities.
After all, in the Ukraine, the divvying up of old collective farms into small, private plots was a pro-capitalist measure. Restricting the sale of the land was an attempt to maintain a diversity of ownership as a counter balance to a resurgent state at some future date.
At the time, the incentives of small plot ownership were also seen as such that small plots could out-produce the large communal farms. That there was another option of large landholdings combining efficient production with capitalist incentives wasn’t really recognized.
This particular article really just pointed out that an unintended consequence of the law restricting the sale of land was a difficulty in achieving maximally efficient food production.
It should be noted that this does not mean the law is wrong. It just means that one of the costs of the law is higher food prices.
We face similar issues every day. Ought we to drill for oil in Alaska or off our Atlantic and Pacific coasts or should we forgo that oil in order to maintain a more pristine environment? These questions, by their nature, are value questions without obviously correct or incorrect answers.
Yet, logic still rules. If one says the top priority is lowering the price of crude, you have to be in favor of exploring in these places. Otherwise your top priority is maintaining a pristine environment.
These basic rules would apply whatever political or economic system one is functioning under.
Bob’s point about the stomachs of poor people vs. the gas tanks of rich people is certainly emotive, but we think it sets up a false dichotomy. The world does not have some fixed amount of food that must be divvied up according to some system of justice.
The amount of food is dynamic and responds quite well to price signals. Surely those of us in the produce trade can attest to that. The implication that if affluent people will only sacrifice and do without, then the poor would have plenty, just isn’t true.
People grow, say, sprouts in New England because there are people ready, willing and able to pay for them. If they suddenly decided to abstain, it is highly unlikely that this production would be on the next flight to Myanmar. Most likely the sprouts wouldn’t be produced at all.
In this whole debate over food policy, it is easy to inadvertently adopt a stilted view of man as some sort of drain on resources. Such a view is impoverishing to the dignity of humanity. For although people consume resources, they create them as well. Petroleum, for example, is not a naturally useable resource; it is only when combined with the ingenuity of man that a worthless, sticky annoyance becomes fertilizer, pharmaceuticals, containers, clothing, etc
Perhaps the prospect of a life rich in so much drives the creativity that creates resources each day. So if we put moral opprobrium on those who are able and motivated to produce by the prospect of providing an easier life for their loved ones, we may turn off the spigots of innovation that fuel the future and in so doing condemn countless people to lives poorer than they needed to be.
The horror Bob feels at human suffering is noble and can be an important motivator for positive change. But the Ukraine story was telling us of how easily and inadvertently public policy can lead to outcomes no one intended. If this is not precisely an argument for capitalism, it is surely an argument for humility in interfering with the operations of markets.
Markets encapsulate the collective wisdom of players across the globe, each expert in his own sphere. If it is impoverishing to think of men as only consumers of resources, it is arrogant to think that a few men, of noble or ignoble motive, are knowledgeable enough to allocate resources more aptly than the market will.
Many thanks to Bob Sanderson of Jonathan’s Sprouts for his thought-provoking letter.