US Agriculture Secretary Mike Johanns recently said that Australia should end its wheat export-marketing monopoly.
In a statement that proves at least one lawyer does understand economics, he stated: “By the nature of things, monopolies tend to be trade distorting.”
We can only wait with bated breath for the US government to call for the end of all coercive monopolies, especially the mintage monopoly, and the monopoly on government.
Is it time for a new Anti-Monopoly League?
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As a country that has pumped so much money into corn subsidies for so long that Coca-Cola ended up switching from cane sugar to corn syrup, the US really isn’t in a position to complain about market-distorting agricultural policies.
Have you tried cane sugar Coke? It’s delicious!
Actually, the reason so many US-made products use HFCS instead of sugar is due to sugar price controls (which is why there is a national and international sugar price, usually the national price being four times as expensive). If this were not the case, Coca-Cola et al would export the ‘cheap’ HFCS to countries like Mexico.
In other words it’s due to ADM protectionism more than corn subsidies.
Anarkhos beat me to it, blame Archer Daniels Midland and its lobbyists in DC. And of course the politicians who go along with the racket.
This article I just googled summarizes some of the institutionalized shenanigans :
http://www.findarticles.com/p/articles/mi_m3778/is_1991_Sept/ai_12059615
But, I do hope you realize that my tongue is firmly planted in my cheek and that the US does not have any right to complain of market distortion. That is why we are still “waiting with bated breath.”
One catch is that, at this level, the “monopolies” are merely local measures anaologous but opposite to similar measures elsewhere. They have a Pigovian effect, so that removing any one market imperfection is removing something that partly offsets another imperfection – so that an end to the Australian local wheat monopoly would actually make things worse in aggregate (although more than 100% of the harm would fall on Australian wheat growers, so there would be gainers in, say, the USA).
blame Archer Daniels Midland and its lobbyists in DC
Thanks for the correction on the sugar-corn thing. I read an article about Coca-Cola’s corn syrup a few months ago, and I remembered the corn subsidies but forgot about the sugar price-fixing. SSDD.
As for the Unholy Alliance between government and business, I blame government first. Archer Daniels Midland didn’t take an oath to protect other people’s interests. ADM didn’t betray a sacred (although obviously misplaced) trust. They are seeking special benefits, but only because the government is in a position to grant them.
If the federal government didn’t have the power to grant these favors, then companes like ADM would lobby politicians about as much as it lobbies the Vatican.
George,
“Have you tried cane sugar Coke? It’s delicious!”
I have always theorized that this is why i don’t like coke as much as i used to. Can the cane variety of any cola be obtained in the states or Canada? I would prefer it i think.
P.M.
I disagree with your statement that “an end to the Australian local wheat monopoly would actually make things worse in aggregate”.
There is no situation where any form of coercion can be shown on net, to benefit society. Therefore, there is no form of coercion, including state monopolies, that can be shown on net, to be successful in reducing the deleterious effects of any previous form of coercion.
All deregulation and reduction in market interventions such as coercive monopolization is always an improvement, regardless of the present level or nature of it elsewhere.
George, you should check out a PBS documentary on ADM and its political dealings (I think it was Frontline?).
ADM is indeed part of the problem, and I would hasten to add that career politicians often become lobbyists (and with Cheney, back to politicians again) and trying to separate the two organizations on any basis other than current employment is a fool’s errand.
Selling policy didn’t come before seeking it. They come hand-in-hand. It’s part of this thing we call democracy.
What’s funny is that the Australian Wheet Board (AWB) is currently being investigated for corrupt dealing with Saddam’s Iraq during the embargo. The new Iraqi government has therefore refused to deal with the AWB. This has lead our Prime Minister to withdraw the AWB’s monopoly (they “agreed voluntarily”), so that other companies in Australia can sell the wheat to Iraq.
You could say an example of two “wrongs” making a “right”. Let’s hope that the example of free market wheat dealing stops anyone from thinking of re-instating the monopoly. What a dinosaur!
Paul Edwards, your assertion, while no doubt sincere, happens to be wrong. It may be a statement of faith, or a sound first approximation extrapolated too far. Pigovian taxes are just one counterexample.
Of course, in general it’s a good rule of thumb to assume that interference makes things worse. Only, it’s just a heuristic, not a guarantee.
Exceptions can be artificial and deliberately constructed like Pigovian taxes or subsidies, or may come about from a combination of randomness and selectively applied reform, but they can and do occur. When their effects are cumulative, even small ones can be material.
ADM is indeed part of the problem
I’m not suggesting that they are not, but what I am talking about is the difference between bad acts and bad laws.
For ADM and the particular corrupt politicians to have engaged in corruption is one instance of a bad act. It’s bad, of course, it should be punished, and deserves our condemnation.
But there is a problem of a much higher order at work here. In this case, it is a rule of Constitutional law, implemented around 1937, that permits the federal government to even enact this sort of legislation in the first place. This rule of law, granting the government the type of power that companies like ADM seek to exploit, is much closer to the root of the problem than the lack of morals among ADM executives. As long as this sort of law is around, it will ensure that there will be a ten-thousand more ADMs and ten-thousand more special privileges enacted on their behalf.
So, when I see that ADM and some government officials collude to enact bad laws, I am more concerned about the government’s side of things, since that is the side of the Unholy Alliance that has broader, more far-reaching implications beyond the facts of this one particular instance of corruption.
P.M,
As Murray Rothbard pointed out in “Toward a Reconstruction of Utility and Welfare Economics”
at
http://mises.org/rothbard/toward.pdf
“…We can only say that “social welfare” (or better, “social utility”) has increased due to a change, if no individual is worse off because of the change (and at least one is better off). If one individual is worse off, the fact that interpersonal utilities cannot be added or subtracted prevents economics from saying anything about social utility. Any statement about social utility would, in the absence of unanimity, imply an ethical interpersonal comparison between the gainers and the losers from a change. If X number of individuals gain, and Y number lose, from a change, any weighing to sum up in a “social” conclusion would necessarily imply an ethical judgment on the relative importance of the two groups.”
Taxation is theft and the harm you do to the taxee through the aggression of theft, cannot be known to have been made up for by the benefits gained by the taxer and those subsidized by this theft. Therefore, in general, there is no way to coerce one individual and ever know that the benefit gained by those benefiting by this coercion will be more than made up for. This is not faith, this is a priori truth; this is praxeology.
–”Can the cane variety of any cola be obtained in the states or Canada?”
Yes, at least in some parts of the US. If you live in an area with a large Mexican immigrant community, you can find the cane sugar version (import from Mexico) in stores that cater to them.
George said in part:
“…I am more concerned about the government’s side of things…”
My point is the ‘sides’ can only be discerned in a fairy land which doesn’t, and in the case of this country, never existed.
Forget 1937. Special privileges existed in this country from day 1! It’s part of the federalist (note I didn’t day federal) system.
The two sides you talk about may as ell refer to the two sides of every man’s concience, not two entites in the real world. Prying apart ADM and the Dept. of Agriculture is like trying to pry apart the military-industrial complex. They are ONE AND THE SAME!
The “government’s side” exists within firms like ADM. It is the sole purpose of ADM’s continual existence. ADM is the ” government’s side” of agriculture in this country.
Prying apart ADM and the Dept. of Agriculture is like trying to pry apart the military-industrial complex. They are ONE AND THE SAME!
I understand what you are saying, but I think you overstate things a bit.
For starters, there is no market among private citizens for the things that the military industries produce. Their only buyers are governments. There is, however, a market (to put it mildly) for agricultural products. Agricultural producers, therefore, have a private component to their productivity, even when they are up to their eyeballs in government collusion in the manipulation of their respective markets. In comparison, military contractors are far more symbiotic with government (to the point of being incestuous) than producers who make things that can be, and are, bought and sold in the real world.
When I said that I am more interested in the “government side of things,” a better way for me to have said this is that I am more interested in the legal side of things.
I am referring to the difference between criminals and the criminal law. Criminals are specific, concrete actors (or actions, really). In contrast, the criminal law is an abstraction, a statement of principle, a declaration of how the government will respond to the various instances of criminal behavior. Crime and criminals are specific and actual; criminal law is abstract and theoretical.
As a lawyer and amateur economist, I am more interested in the legal and the theoretical aspect of these matters. I am more interested in a priori reasoning than I am in the behavior of specific actors.
When ADM and the government collude, their relationship is asymmetrical — they bring different things to the table. ADM brings the motive and the money, government brings the violence (i.e., it’s claim to be the final arbiter and user of force). Government declares and embodies the way in which it uses force through law (or, legislation and regulation, at least).
Since I am more interested in the state of the law than concrete examples of bad acts, I am more interested in in the government’s role in its collusions with business because government is the law-giver, the law-maker. This is true whether it is fixing prices, or taxing people to pay for a subsidy, or any of the million other market manipulations it engages in.
I am not saying that ADM is not just as culpable. I am saying that, when I am taking a position on what the law should be, that argument is addressed primarily toward what government should (or should not) do.
From what I gather our Prime Minister has sent a team of bureacrats to Iraq to try and re-establish wheat sales and if they fail he says he will likely end the monopoly.
Let’s hope they fail then. And he ends the monopoly and any tax financing. And maybe have to pay back the cost of the trip as well. And sells their offices under their feet and makes them run it all from their bedrooms.
After that I wouldn’t want to restrict them in any other way.
It has gone a little bit further than that.. the monopoly has been suspended (hopefully not to be re-stated).
“..Yesterday Prime Minister John Howard announced that AWB had agreed to allow other wheat exporters to supply wheat to Iraq in the current tender.”
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