Lobby madness

That last post got me thinking: probably the best argument in favour of agricultural protectionism is that it keeps farming as a small business.

After all, farmers are basically commodities producers, and with a few significant expections (George Soros, Marc Faber) small businesses and the commodity trade don't go hand in hand. It's simply too risky to bet the family home on the next season's crop yield. Under normal conditions, farmers would be like professional gamblers, only with fertiliser and tractor costs thrown in. Not a good model for a stable life.

The world seems to have come up with two solutions to this: financial derivatives, which were developed to help the US midwest's grain and livestock farmers to get a steady price for their products and pass the volatility risk on to speculators; and subsidies, which protect farmers from dips in the market.

Small farmers do use derivatives surprisingly regularly, but I think it's tricky enough as a market that they wouldn't survive against the Wall Street rocket scientists in a state of nature. Which suggests that taking away the subsidies would see farmers gradually give up and turn their land over to people with the capital and appetite for risk to take on the inherent volatility of the industry: big business.

The outcome of that would, I think, be something like the US farm system. Agribusiness concerns like Cargill and Bunge would become very dominant, but this would do little to diminish the lobbying power of farmers. If anything, wedding big business funds with the persistent popular perception that farmers are a bunch of salt-of-the-earth hayseeds would produce a lobbying machine of even more awesome might than we have at the moment.

Look at the US; not only does it still subsidize farming: it does it to a lavish extent in the teeth of a brutal deficit-cutting frenzy. At the same time that Congress is cutting nutritional requirements from school meals for poor children, it has renewed a program paying $150m a year to Brazilian cotton farmers. This was introduced after Brazil successfully sued the US at the WTO over its cotton subsidy program; in settlement of the suit, rather than give up its own farm subsidies the US agreed to start funding Brazil's as well.

I don't know that eliminating subsidies would automatically hyperpower the farm lobby, but my impression from looking as other industry lobbies is that ones representing industries with a small number of very big businesses - oil, finance, mining - tend to be a lot stronger than those with large numbers of smaller business members - farming, construction, retail. Given that I think business lobbies generally have too much political influence, I'd much rather have the latter than the former.