Posted
June 15, 2007: One of the main discussion items amongst
farm organizations is how to help the majority of farmers
in their quest to obtain adequate income. In this regard,
much of the debate lately has centered on things like expanding
farm operations, cutting costs, adding value to products,
improving marketing skills or increasing exports. In and of
themselves, all of these things are good, but they miss the
main point.
Underlying many discussions about farm income are some conflicting
values and assumptions about how markets should function.
Consider the following: Today’s market rhetoric makes
the assumption that a willing seller and buyer are really
all it takes to make markets work. However, this assumption
totally ignores the fact that market exchanges between buyers
and sellers are always accompanied by institutional arrangements
set up by the larger society. Even the most ardent supporters
of free enterprise generally admit that their view of markets
would not work without courts to enforce contracts, a stable
supply of currency and a host of regulations and laws. These
arrangements are all institutional in nature and embedded
in a view of how society and markets should function.
Author Linda McQuaig, in a book entitled “All You Can
Eat,” spends some time chronicling how economies of
the past structured their markets. In one example, she shows
how English regulations from the sixteenth and seventeenth
centuries severely restricted the role of middlemen in the
economy.
For example, farmers were required to bring their grain to
the local market as soon as it was harvested, were not allowed
to sell to a middleman prior to harvest and couldn’t
store the grain in hopes of obtaining a higher price. Once
at the market, common people could purchase grain or flour
in any quantities they wanted, under careful supervision of
weights and measures. After the common people had made their
purchases, middlemen were allowed to buy strictly limited
quantities of grain but weren’t allowed to store it
in hopes of obtaining a higher price in a later market.
McQuaig points out that the overriding concern of those older
British markets was to ensure that people didn’t use
leverage to advance their own interests over the interests
of other people. And they established regulations and market
arrangements accordingly.
In essence, markets are never free of institutional arrangements.
We make rules and establish arrangements according to which
values we think are important. Getting back to the question
of helping farmers to obtain adequate income, the larger question
may simply be: Do we have the right rules and regulations
in place to help the majority of farmers obtain adequate income
from farming?
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