As America’s Industrial Ag. megalith continues to pump out lousy food and toxic chemicals into our bodies, the natural response to use local farming is growing like there’s no tomorrow.

From a USA Today news article here.

“The “local” movement — buying and eating food produced locally rather than shipped from thousands of miles away — has been gaining steam with the steady growth of farmers markets and a phenomenon called community-supported agriculture. CSA members purchase shares of a farmer’s crop for the season. The government doesn’t track the numbers, but Local Harvest, a nationwide directory of small farms, farmers markets and other local food sources, estimates that tens of thousands of American families belong to CSAs, and supply trails demand. The number registered with Local Harvest alone indicates how quickly CSAs have multiplied over the past decade: The directory’s listing has increased from 374 farms in 2000 to 3,660 today.”

Additionally, the Farmer’s Market phenomenon where urban areas set up local farm bazaars, normally once a week, is also growing.  From the USDA this:

No one can confidently predict future events but everyone can confidently predict how to prepare for future events.

For example, we know that anywhere from 82 to 93 cents of our food dollar goes to marketing and distribution, leaving 7 to 18 cents for the farmer.  We also know that energy cost increases impact the food industry just like any other industry.

In the food industry we know that the processing part is most vulnerable to energy cost increases, seven times more vulnerable than the farmer himself.  Consuming fewer processed foods would make overall food costs less vulnerable to energy price increases, in other words.

We also know that many foods travel thousands of miles going from the farm to the consumer.  Shorter supply chains, therefore, would diminish the impact of energy price hikes.  One way to shorten supply chains is to encourage local farming, particularly if the farming can be located around urban areas.

Producing synthetic fertilizers is energy intensive.  Using compost or other natural means of fertilizing soil would reduce negative impacts on food prices caused by rising energy prices. 

Shorter supply lines, less use of synthetic fertilizers, less consumption of processed foods:  What this describes is organic farming.  Which as it happens is currently the fastest growing segment of the food industry.

The primary argument against organic farming is that conventional farming is more efficient–that larger farms, larger processing facilities, more use of fertilizers and other artificial inputs like growth hormones, produces more food in total at less cost. 

Two points here.  The first involves this article’s first sentence and its emphasis on preparedness.  Smaller, more plentiful and diverse farms, whether purely organic or not, may be a food system more resilient against unforeseen shocks.  Industry models built on the traditional manufacturing definition of “efficiency” through mass production may be wringing out the food system’s ability to survive unforeseen, negative shocks.

The second point involves recent research that directly challenges the claim that the industrial model is more efficient, even when using the classic efficiency metrics that don’t consider the costs incurred by unforeseen negative shocks.  Studies are showing that modern organic farming techniques have increased production efficiencies that, with many base grains and other foods, surpass those of conventional farms.

The question is are there government policies that can encourage a more diverse farming system, one more resilient to unforeseen shocks, and be efficient too?  And would it be wise to experiment with these types of policies, even if there aren’t any shocks, unforeseen or not?

Why not?  We already do this for conventional, monoculture farming.  Right now we subsidize corn farming to the tune of between $4-$7 billion per year.  From the measurement of increasing production, this subsidy has been wildly successful.  Because of the subsidy, corn production is at historic highs, surging even when the farmers aren’t making money.

Why not do the same thing for organic farming?  If such a subsidy has a similar impact on organic farming that it has had on corn farming, could that be considered a bad result?

Would it be a bad thing to have more nutritious, diverse, non processed foods produced by more numerous, smaller farms closer to consumers?  Of course not.  It would be a tremendously good thing.

That we don’t do this as a country shows that we have not yet learned, despite a number of unforeseen shocks to our economic system, the value of preparedness.  In economics the price of not being prepared is called a “tail risk.”  The most recent meltdown of our financial system was a classic example of underestimating not only the probability of unforeseen shocks, but of underestimating the damage of such shocks.  As a result the nation lost trillions in wealth and millions of jobs.

If you think that was bad, consider the impact if the meltdown had come in the food industry.  We may not be able to predict the future, but we can understand the impact of an unforeseen negative event and be prepared.

So subsidize organic farming.  We need a more resilient food system than we have now.  We need to be better prepared.

About $4-$7 billion in annual corn subsidies will expire at the end of the year unless they are extended by Congress.  There is already a bill in Congress to extend the subsidies for another five years, and it could come to the floor as early as next month, according to CNBC reporter Jane Wells in a report this morning.

Beezer has written several times about the ill effects of this subsidy on the nation’s health, here,  here and here.  If you want a full list, just go to the search box to the right and type in “corn subsidies.”

To make a long story shorter, the subsidies have basically destroyed our small farms and thus our food diversity, engendered the mass production of less nutritious food and, in the case of beef and chicken in particular, resulted in food that’s laced with hormones and antibiotics.  The results of this is proving to be incredibly expensive as we’re having an epidemic of obesity and diabetes. 

It’s also enriched the big corporations in what is commonly referred to as “Industrial Ag.” Industrial ag is yet another big corporation dominated industry–a classic oligopoly which seeks to use government power to inhibit competition and thus fatten profits.

It would seem to be a no brainer that if we’re going to subsidize farms, we should use the subsidy to encourage growing healthy food, and growing a wide variety of healthy food.  It would seem obvious that having a healthier population being fed nutritious food is excellent policy.

As we’ve already witnessed in health care reform, are witnessing in finance reform and will no doubt witness in this corn subsidy battle, getting good things done in Congress (particularly in the Senate) is incredibly difficult when the opponents are entrenched oligopolists who dominate the industry.

This isn’t really about just one vegetable, corn.  This is about our entire food supply.  Mono cultures never survive.  And we are rapidly being turned into a mono culture.

Consider this paragraph in a March Newsweek article that touches on the upcoming battle.

“Of course, none of these efforts will change a thing if we don’t overhaul what we eat (too much fat, sugar, and salt) and how we eat it (supersized portions). Take one highly publicized ingredient, high-fructose corn syrup, which is derived from corn and has made its way into a multitude of the foods and drinks we consume—ketchup, sodas, and even the presumably good stuff like salad dressing and yogurt. A formidable contingent of nutritionists believe that agricultural subsidies for corn and other crops have contributed to the obesity crisis by making fattening foods cheap and ubiquitous. They want the subsidies expunged. Others, including USDA economists, argue that the effect is small and that eliminating them won’t solve the problem. It’s unlikely, given the outsize power of farm states in the Senate, and of Iowa in choosing presidential nominees, that the subsidies will be axed. But you’re certain to hear a lot more about this in the run-up to the 2012 farm bill. In the meantime, here’s something to chew on: a new study out of Princeton University found that rats who consumed high-fructose corn syrup gained significantly more weight than rats who ate plain old table sugar—even when they took in the same number of calories. Sign them up to testify on the Hill.”

All the internet blogs in all the world plus all the votes in this country may not be enough to bring common sense to America.

But we can try.  Subsidize healthy food, not just corn.  First Lady Michelle Obama, your organic White House garden, and the nation’s health, awaits you.

One facet of understanding markets, and economies, is to understand how much cash is sloshing around “out there.”

During the low interest rate Greenspan era after the 2000 recession, corporation profits and cash holdings built up to historic levels.  So did the cash holdings of the wealthiest cohort of Americans.

Cash has to go somewhere, particularly if interest rates are low.  As we know now, a good portion of the cash went into housing and into financial innovation securities like credit default swaps.  And into the stock market.

The bubble built and burst far beyond the housing market itself because the housing bubble was mirrored on Wall Street by the swap market bubble.  The second bubble was the one that cratered the financial industry throughout Europe and the US primarily.

The underlying problem is that investors can’t find enough productive investments.  In an ideal world there would be industries and innovations sufficient to handle the money created from corporate profits.  In an ideal world these types of investment opportunities would create new jobs and income growth.  But the private markets haven’t been able to create, net, any new jobs for the past 10 years. 

And so the cash horde is building up again.  Right now the cash sitting on corporate balance sheets is about 12% of total assets.  That’s more than double the historic average.  Outside of corporations, the amount of cash sitting in money market funds is also at historic highs.

Yet this is happening while unemployment rises to 10% (16% in the US if you count the people who quit looking for jobs or are otherwise underemployed), more than 5$ trillion in US private wealth disappears and sovereign nations build up deficits as their revenues shrink.

So why is there a lack of productive investment opportunities–the kind of opportunities where money goes into new jobs, new machines and life enhancing innovations?

Because right now all the real opportunities, the really big ones, need government help.  And in the Democratic, developed countries governments haven’t done a very good job of identifying the right policies and the right government funding to get things kick started.

So what might these really big opportunities be?

• Energy.  Everyone knows that, inevitably, fossil fuel energy is going to become more and more expensive.  It won’t go straight up, of course.  Nothing does that.  But the fundamentals, and the trends in pricing, are as clear as the nose on your face.  Governments should adopt a multi-faceted set of policies that together would spur innovation and development in alternative energy.  Natural gas and nuclear might be good energy sources to “bridge”  into the era of truly clean and sustainable energy.  They would buy private markets time and security for risk taking–particularly if the government put subsidy floors under the new industries allowing them to attract private investment.  The so-called “green revolution” would take off with the right policies and subsidies.  And the promise of job and income growth would take off at the same time.
• Transportation.  You now hear that the automobile industry is going to eventually disappear.  Possibly.  But more likely it will evolve into an industry where more and more efficient cars are designed and built.  In 10 years I wouldn’t be surprised if there are very few gas stations.  There may be stations where you can “charge” your car.  But the days of selling gas may be the real industry that won’t survive.  On the flip side are trains.  That industry is likely to grow because it will have to–particularly in the area of commodity transportation.  Governments who adopt policies encouraging expansion of rail infrastructure will not only create private jobs and income growth, but will make other industries more competitive by controlling transportation costs.
• Agriculture.  This is another broad area where growth may come because it has to.  And it’s an excellent example of displaying the power of government subsidies.  Unfortunately, the subsidies were to the wrong companies.  The US subsidizes corn to the tune of $4 billion annually.  It’s been a stunning success in some regards.  We’ve basically become a corn dependent nation.  The corn is artificially cheap which means our beef and chicken, even farm raised fish, are cheaper than they would otherwise be.  Unfortunately, the food that’s cheaply produced isn’t very healthy.  And non corn food prices have gone up sharply.  So we’ve lost our food diversity too.  What if we changed our policy and started subsidizing the production of healthy foods?  What if we subsidized an increase in food diversity instead of one that concentrates fewer and fewer jobs into fewer and fewer corporations that make money on corn and corn derivative production?  Such policies would not only make us more healthy (thus reducing obesity and diabetes for starters) but would save the nation billions of dollars in medical costs.   Plus, there would be more farms and thus more farm employees and farm equipment.

These are just three major areas where productive investment opportunities will arise with the right government policies and subsidies.  They are huge areas offering the potential to create millions of jobs and billions in profit and income.

Repairing poor policies comes along with this package.  For every new subsidy aimed at the right target, there are other subsidies that should be stopped.  The corn subsidy is one striking example of what should be eliminated.

Financial regulation reform is another example.  Under the current regulatory regime, the policy is that we will always bail out “too big to fail” bank holding companies.  This is a huge subsidy, without question.  And it cost the nation dearly.  In the trillions of dollars.  If these banks can’t compete without this subsidy, then we need a new banking system from the ground up.  Done properly, financial reform will greatly improve the stability of our financial system, and that, all by itself, will give the overall economy a boost.

Health care reform is much like financial reform.  The policy has been to subsidize health insurance companies, to support medical professional wages overall, and to protect drug and medical device innovation.  The health reform package just passed is a step in the right direction.  But it has deep flaws that won’t do much to withdraw the subsidies of the previous policies.  To the degree that it is improved and thus reins in out-of-control price hikes all along the health care chain, the new policies will ”save” tax dollars that could be re-directed towards more growth oriented industries.

Better international trade policies are needed, as well.  Our laissez faire approach to international trade, similar to our laissez faire approach to financial regulation, has kept a lid on domestic job and income growth.  If our policies are able to protect domestic industry and labor’s income,  they will also support domestic demand for product.  And robust demand is a good force for job and income growth. 

The health care reform effort and the financial regulation reform effort represent only one kind of policy change:  The one trying to repair damage caused by poor policies.

What we also need is the development of policies aimed at spurring private investment directly into specific areas such as those mentioned before.  Targeted, coordinated government efforts at creating sustainable improvement in our economy.  If we can manage to implement these types of aggressive, forward looking, policies the nation will prosper.

Economies grow because capital is being invested in labor and technology to grow one or more industries.  But this doesn’t happen just because one wants it to happen.  There has to be one or more “triggers” creating the need for more capital and labor.

Triggers could be a strong rise in population growth or some strong form of ”game changing” innovation that literally creates new companies, industries and products.  Or, as is often the case, governments decide to support certain industries by directing subsidies or tax incentives their way to insure growth. 

China is an excellent example of growth created by government actions to support exports.   If Ford wants to build a factory in China, Ford would have to partner with a Chinese firm, would have to use local labor and some portion of local product supplies and would have to export half of what they make.  These and several other official government policies, including pegging their currency to a value just under the dollar which guarantees China a price advantage, have been successful in creating jobs, income and overal economic growth in China.

In the US, taxpayers pump billion of dollars into basic research in several industries which, in turn, results in innovations that are made available to private industry.  Two related industries, medical devices and pharmaceuticals, have received much of this money.  It is no accident, therefore, that these two industries have been shining stars in terms of growth and income.  In the 1950s under President Dwight Eisenhower, taxpayers subsidized building the interstate highway system, which in turn guaranteed an explosion in the automotive industry.  The all important internet was invented, tested and installed by the government and then handed over, literally without charge, to private markets.  The internet has been a tremendous job and income creator not only in the US, but worldwide.

But America, for a number of reasons, has forgotten how important government action can be for supporting real job and income growth.  In fact, a common theme in Washington DC today is that government can’t do anything but waste taxpayer dollars and destroy jobs and income.  This belief may be the single most important cause of America’s fall from economic grace.

The US should take a page or two from the Chinese.  Running huge trade deficits is like having a hole in a tire you’re trying to inflate.  Every pound of pressure you try to put in the tire, just goes out through the hole.  China’s policies insure that investments they make results in the export of native made product.   Having local labor and product requirements, plus export requirements of product made, do just that.

The US should have the same requirements.  That we don’t have sensible requirements insures that US corporate and private investment capital results in jobs and income growth outside the US.   We’ve been making more product and hiring more people–just not in the United States.  

At the same time, we have subsidies that are wasteful and inhibit native job and income growth, among other ills.  Take the annual $4 billion subsidy for corn.  It has made corn cheap and plentiful, but it has created a giant industry that is destroying agriculture and making our country, literally, physically ill.  Ill health and the destruction of farm jobs (not to mention all the related supporting industry jobs) has helped weaken the nation for the benefit of the few.

From the blogsite accidental hedonist:

01/24/06, by Kate Hopkins 33988 views • Categories: Food Politics, High Fructose Corn Syrup (HFCS)

Financial regulatory reform.  Considering what the country has suffered, and still suffers from, one would think this “trigger” would be obvious.  But amazingly it isn’t.  Setting strong limits on what the taxpayer will guarantee in the financial industry and setting strong groundrules on speculation and leverage would appear to be screamingly obvious.  But because of the same philosophy of lousy government and tax cuts, we still have strong opposition in Washington DC to even these basic requirements.  Reform here will avoid financial disruptions in the economy, an economic boon all by itself. 

From 1932 until the late 1980s (almost 60 years) the US was spared financial meltdowns when these common sense rules were in place.  But because of the same philosophy the rules were weakened beginning in the 1980s, and eventually eliminated entirely in 1999.  The result: Seven financial economic crisises, including the last one which may still outdo the one that created the Great Depression of the 1930s.

Health care reform.  Again what should be obvious to everyone (we can’t afford the system we now have) became merely a side item on the menu.  The real opponent to reform was (can you guess?) fear of government, and unwillingness to actually pay for (read lower, not more taxes) a new system.  The main issues of better healthcare, cost control, and universal access to health care services for more than 30 million uninsured, became irrelevant under the onslaught of this misogynist (one of hate) philosophy.

So there’s some triggers.  To Beezer they should be as obvious as the nose on one’s face.  But our belief in the myth that government, due to some mysterious illness (despite more than two centuries of evidence to the contrary), can’t even pull up its figurative pants by itself remains virulent in DC and within the Republican political party as well. 

Too bad.  We’re well on our way to becoming a declining nation with a declining economy and declining standards of living.  So much we could do, so little understanding and will to do it.