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Monday, February 11, 2008

Selective "Free Markets": Time To Reconsider



This doesn't make an immediate connection to the presidential campaign, and yet is has more to do with it than one could imagine.

I am very leery of those who expound upon the virtues of the "free market," as if such is a panacea, a cure-all to economic questions. Particularly the selective aspect of its proponents.

Consider this: in the 1970's, Chrysler was in trouble, big trouble. Despite objections from many Congress voted to loan Chrysler $2 billion. The labor unions made concessions, Lee Iacocca came along, and within years Chrysler was back on its feet. It is arguable that it worked to a certain degree.

Now go back to the 1930's. The economic mess that existed at that time had one unusual characteristic: DEflation. Most of us alive today have never lived it and therefore would find it difficult to think of falling prices as a bad thing.

But they were. Farmers in Iowa could not get enough for their corn to justify the cost of shipping it to market. Long before bio-fuels became a household word many people were using corn for heat.

Along came Franklin Roosevelt and his New Deal. No one had all the answers; it was more a quest to end the Depression and government had a role in doing so. It was true "thinking outside the box" in that for the first time farmers were going to be paid NOT to produce. Hog farmers could not understand how their crops and animal products could give a greater return by lowering the supply.

It was inflationary, but that was a price to be paid in an effort to preserve American capitalism. Within the context of the 1930's it made sense to tax some people in order to pay other people not to produce. There was a human cost too; in the South many sharecroppers were made homeless since the land owners did better by not having anyone produce anything. These people, black and white, became part of the great internal migration of that time.

Up until the last year or so no one would have thought much about this process' impact on their lives. But.....we're over 70 years away from the Depression. The continuance of these farm subsidies is akin to building Civil War cannons for the modern Army. In the 1930's over 25% of Americans lived on farms. Now it's something under 2%. Most agricultural activity is through huge agri-business combines.

It is absurd for people like Sam Donaldson or Ted Turner to be receiving payments from the U.S. government for NOT doing anything with their land. Particularly at a time when Americans (and everyone else on the planet) are paying a lot more for food because of the emergence of ethanol as the answer to all of our energy problems. Which it is not, of course.

While not an economist, I question what the government is doing, and also question the wisdom of continuing to have government manipulation of agricultural products. With the high inflationary nature of ANYTHING to do with corn or grain, why are people being taxed to give money to people who own land but don't grow anything on it?

Why is the government STILL carrying out an inflationary program in an inflationary time? I know there's votes in them there milk buckets and corn cribs, but it seems absurd to apply an early 20th century solution to a 21st century situation that is the reverse of the program's original intent.

There's not much glamor in this subject. But there's a lot of money. It's brought home to me every time I see the latest price increase in food, always because of the high cost of corn products, wheat products, etc.

The "free market" is supposed to make thing more abundant when prices increase. It is never going to happen if we are spending money to do the opposite.

Next thing you know, the fire department will use kerosene to put out housefires. They'll only be following the example set by the geniuses.
Cross-posted at

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Blogger Papamoka said...

These things take time Mr. Jones... Just last year we stopped paying for the Spanish American War on our phone bills. These things take time... Geez... no patience...ROFLMAO

6:43 PM  

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