Friday, December 12, 2008

Only Corn

I just have time for a little mid-afternoon post today, but I heard something that caused me to think on the radio on the way to the hospital today (check the P.S. for an update). What I heard was Ken Root from WHO's "The Big Show" comment that a couple of years ago people were telling him that they didn't want to plant beans ever again. I'm sure this thought process had a lot to do with growing ethanol market (at the time) and the rising corn prices. But, it also has something to do with everything that is involved with the yields and the growing of corn.

Now for the but ... If you plant corn on corn on corn on corn (you get the idea) you are going to have some serious soil nutrient problems. In order to fix the nutrient problem you are going to have to apply a lot of chemicals and what not (again you get the idea). This brings you into a vicious circle that can only be solved by rising grain prices because you can only assume that input costs are going to continue to rise, especially if you use them more and more.

Despite all of the potential problems there are still probably going to be farmers that plant corn on corn this year because there is a possibility for good prices in the future because of dry conditions, debt, and the somewhat stronger position of the dollar compared to a few countries. Ahh, the global market at work! It is an interesting position that we are in right now and even somewhat scary ... what do you think?

Now for the P.S. Today is a good day for Jim (and Laura and the rest of us!). He had the vent removed and has been able to talk a few words and even kiss his wife!!! We have a long ways to go, but today is just a very happy day in the waiting room. In fact we are even talking about the possibility of moving to a different waiting room ... something to look forward to!

34 comments:

creativematt said...

I'll trade you sheep for wheat.

Monica said...

It seems to me that there are two things spurring this: subsidy money (I'm not sure how much difference in subsidies between corn and soy, etc.) and ethanol. Yet another example of government intervention spurring unwise ag. practices.

Rich said...

I've been reading about different crop rotations including winter wheat lately and have noticed research coming out of ISU and USDA’s National Soil Tilth Lab in Iowa on subjects like adding red clover and cereal grains to the typical corn-soybean rotation.

I would think that this type of research on more diverse rotations like wheat-clover-corn-soybeans would spill over into the local area.

Blessed Beyond Measure said...

Now for the P.S.....

God Is Good! All the time!

continuing to keep all in our prayers....

Yeoman said...

"Now for the but ... If you plant corn on corn on corn on corn (you get the idea) you are going to have some serious soil nutrient problems."

That's a fact.

I planted corn on corn in my big garden, when I had a big garden, a few years back. The soil is marginal here, but my garden spot was good.

Corn on corn was a bad idea, and my garden was a disaster. I tried to go all organic on it for several years in a row, and did okay, until my last year, which was an agricultural flop.

Yeoman said...

While only tangentially related to this thread, I wonder if we small farmers/ranchers are actually beginning to have an impact? On this morning's US Farm Report a commentator, who represented himself as a big production farmer, was urging that the spats (shoot, I didn't know we were spatting) between big production folks and agrarian farmers ought to come to an end, and it was time for agrarian farmers to get more attention from the USDA.

Rich said...

Since US Farm Report's commentator said that the 'spats between big production folks and agrarian farmers ought to come to an end', how would the differences between big farm, small farm, commodity farm, agrarian farm, or sustainable farm be most easily explained?

Wouldn't the definitions vary depending on where in the world the farm was located?

Regardless of the definitions, getting more attention from the USDA doesn't sound like it would be that helpful to anybody, big or small.

Yeoman said...

"Regardless of the definitions, getting more attention from the USDA doesn't sound like it would be that helpful to anybody, big or small."

Oh, I don't know about that. Like it or not, we have a directed farm economy.

Most farmers are ready to criticize the USDA, and with good reason. But what the USDA does or doesn't do impacts us all. And for big farmers, criticizing the USDA is unintentionally hypocritical, as the system they depend on is a creature of government direction.

To expand out, there aren't any countries left that do not have a directed farm economy. So, we're going to have direction, and we're better off if that's a direction we want to travel in, rather than against.

Also, fwiw, I think that outfits like the USDA are engaged in a truly thankless task. The folks they help don't appreciate it, those that they hurt are mad, so everybody hates you all the time.

Monica said...

"To expand out, there aren't any countries left that do not have a directed farm economy. "

Not true. New Zealand completely eliminated farm subsidies in the early 80s. Their sole farm support programs are now in the form of research. New Zealand's farm programs resemble what ours would have been like back in the late 1800s -- that is, extremely minimal. Some basic research and that's it.

I've written about the history of the USDA here: fa-rm.org.

Food safety regulations and farm "support" programs did not originate until 40-70 years after the inception of the USDA. Wonder how humans survived all that time without their regular doses of government bailout crack. :)

In my study of the matter I've come to the conclusion that the USDA needs to be eliminated, not reformed. That sounds radical, but somehow this country survived for about 80 years without a USDA and if our founding fathers could see what this agency has turned into they would roll over in their graves if they could. Eliminating it could really be simple though it would upset a lot of people.

First, eliminate the School Lunch Program and Food Stamps, a massive 2/3 of the Farm Bill budget (up from just 1/2 of the budget 20 years ago!). Parents and caregivers should feed their kids with their own earnings. If they can't, that's where charity comes in, and Americans are a very charitable people -- so long as they remain free and uncoerced by the government through burdensome wealth-redistributing taxes.

2) Phase out commodity crop subsidies, roughly 1/3 of the budget. Actually this was the plan under Bush's Freedom to Farm Act and then he caved. So it's not as if it hasn't been in the works before to eliminate subsidies. We need to try again.

3) When we are done eliminating 1) and 2), we have a whopping 5% of the USDA budget allocated to food regulatory concerns and research. Phase these out by replacing USDA inspection with private certification. I drink raw milk and have been drinking it for a whole year. I get it from a farm that has it independently tested for pathogens. Sounds radical maybe but I haven't died yet and I could never go back to milk bought in a store. It is amazingly delicious and government agencies have no right to conduct a war on this product and the health of the American people, as their are now doing. Don't think private inspection can ensure a safe food supply? Creekstone Farms wants to test for mad cow and the USDA won't let it. Sounds like a broken agency to me.

Certain necessary parts of the agency could be redirected to customs (which would make safety assessment of the importation of various plant and animal stocks much more objective and less subject to special interest pressure).

What about research? Well, a good deal of USDA research has been marvelously successful, but imagine how much more successful private funding would be. Private companies certainly wouldn't be pouring millions of dollars into research for unprofitable ethanol from corn (cellulosic, maybe).

We have a marvelous, nearly 30 year case study in almost completely free market (i.e. undirected) farm economics and the message from farmers "down under" is quite clear: get off the subsidy gravy train ASAP. Only 1% of farmers lost their farms. The wine industry started and completely took off without any government help whatsoever. The market for lamb is spectacular. All the dire predictions that NZ's farming industry would collapse never came true. In fact, it is thriving as never before.

Americans should pay heed. We don't need to reform the USDA. We need to eliminate it.

Steven said...

Thanks Monica

Yeoman said...

Monica,

Great stuff.

I largely agree with your comments, and find them encouraging.

Keep in mind, however, that I didn't say that all countries have farm subsidies, I said all have a directed farm economy. I'm encouraged that New Zealand has no subsidies, and from what you posted, they might actually not have a directed farm economy. We'll have to rely on more input from you on that.

But, I suspect they have some sort of directed farm economy. If, for example, they encourage, or prohibit one type of farming over another (such as allowing, or prohibiting, corporations to farm) it's a directed farm economy.

I'd like to see what you wrote about done here, but in order to work here, we'd have to go one more step. We allow corporations to farm, and we allow corporations to be involved in processing farm goods. Corporations (as we know, from the Latin "corpus" meaning body) are a "person" in the yes of the law. As long as that is allowed to occur, it will be largely impossible to return to generalized "family" farming. Corporations, by their very nature, allow huge scale, which is something we have to contend with here. I'd guess that this isn't the case in New Zealand, as it's smaller land mass and population makes corporate farming, and all that goes with it, less attractive.

Still, you brought up some excellent points, and I stand corrected. I'd like to stand encouraged too, but I'm afraid that to do something like that here would require a huge reform on how Americans view and treat corporations, which seems very unlikely.

Yeoman said...

By the way, I'd really like to hear more about agriculture in New Zealand. It sounds really interesting.

Rich said...

From what I've read, New Zealand exports the vast majority (up to 90%) of its agricultural output, and is based on a system of grazing that is similar to management intensive grazing with a focus on grass based dairy cattle.

I also get the impression that New Zealand (and Australia) have a number of labor saving techniques that allow them to handle a larger number of livestock and acres with less people (due to a historically smaller labor force).

Monica said...

"I'm afraid that to do something like that here would require a huge reform on how Americans view and treat corporations, which seems very unlikely"

I agree in part, but I'm not as hopeless as you are. :)

Personally, I don't care whether corporations farm, so long as their ventures are economically sustainable all on their own (and to do that, they'd have to be largely ecologically sustainable under a laissez faire system that protected property rights -- that you cannot violate someone else's property rights through pollution, which modern ag and feedlots often do. And that you cannot snatch someone's tax dollars to subsidize your product. Too often laissez faire is taken to mean the protection of special business interests. That's not what it means.). Corporate farming would be somewhat successful here without government assistance, I'm sure, but not as successful as it has been.

Ultimately, Americans will buy what they want, so I am sure many corporate farms would remain in business because economies of scale produce most food more cheaply (and I don't necessarily have a problem with that). However, I have absolutely no doubt that farming *practices* -- which is what I really care about -- would be much more rational, whether corporate or not, and that there would be more family farmers under laissez-faire capitalism with a proper protection of property rights. (Under such a system, the USDA would be dismantled entirely and there would be no such thing as a farm lobby or any other type of lobby grabbing for a piece of the taxpayer pie. They would have to survive on their own. No government bailout crack to prevent unprofitable farms from going under.).

Farm policy in the US is mostly directed, not by allowing corporations to exist, as they have done since the 1800s, but through subsidies and price supports. Before that, starting with Hoover and FDR, it was just price supports. Before that it was food safety regulations such as the Meat Inspection Act and pasteurization edicts.

There's no question that we're never going back to 100% family farms in the United States. The fact that so many farms consolidated under relatively free-market economics before the FDR era is evidence of this. I think there's a free market historical precedent there for consolidation of farms. (Were there corporate farms at this time? I honestly don't know, but there was consolidation.) On the other hand, the *enormous* consolidation of farms we have today is inherently unnatural. Farmer's markets, CSA's, and locally grown produce and meat is a burgeoning business and mostly without government help (and often with a great deal of government interference through food inspection laws). Organic is largely corporate, but why? Part of the reason is that only the corporations can afford the cost of organic certification. There was no "certified organic" in the 80s unless you were getting certified by NOFA or Oregon Tilth, right?

So I'm not sure we need to change the way corporations are viewed or treated, so much as we need to change or eliminate the rules altogether that have resulted in such a sharp rise in corporate ag. Get rid of the regulations that create disproportionate cost to small farmers, and eliminate the subsidies that disproportionately reward large farmers (whether corporate or not), and the rest will take care of itself.

I'm honestly not sure how "directed" NZ's farm policies are. Most of their land was devoted to ranching in the 80s and the amount of government-held land has pretty much held constant, I think. But the wine industry basically took off without any government assistance whatsoever after subsidies were eliminated, so that tells me farm policy can't really be that directed, as in "You're not allowed to plant this or that." Rich points to less human labor necessary in NZ because they are ranchers. That's true. I lived in a NZ ranch for four months -- sheep and cattle are rotationally grazed, there is a heavy use of herding dogs, and very little management other than that. I have no idea whether this uses more or less human labor per land area compared to grain farming. My guess is that is actually uses slightly more... but I don't know. Yet it's reasonable to presume that over decades, without government grain-based nutritional dictates and grain subsidies, that Americans would also desire more grass-fed meats. After all, it's not as if there's not a historical precedent for this in the US. (Buffalo!) Would some of this grass-fed industry be corporate-controlled? Probably, especially since grass fed requires more land mass than grain fed. Without the USDA inspection guidelines that are prohibitively costly to small farmers, though, I rather doubt that corporate farms would have the enormous market share that they do. See this post: http://www.fa-rm.org/blog/2008/12/abolishing-usda-inspection-laws.html

Monica said...

There is also no question that at the current time, most farmers growing rotations of these subsidized crops would absolutely not money without the subsidies. If subsidies were cut off immediately, I am not sure exactly what would happen. No doubt this would spur some measure of more consolidation. But would corporations even be successful at making a profit without the subsidies? I don't know. At some lower level of the crops when the market worked itself out, perhaps. But I have to believe this would have a very strong effect on farming practices in very short order. Without cheap grain, the feedlots become more economically unsustainable. And I believe it would happen in a matter of years, not decades.

Just some thoughts... I'd be interested in hearing others' thoughts on what would be the practical effects of a lack of subsidies.

Rich said...

My interest in subsidies leans more and more towards the pragmatic, structuring the farm operation so that it isn't dependent on subsidies of any kind. If it can be profitable while disregarding the effect of subsidies, it will be able to weather the storm if and when subsidies are eliminated or drastically reduced.

Ideally, I could opt out of the farm program completely, but since a portion of the farm is rented, that currently isn't an option.

While the elimination of farm subsidies is an interesting subject, the main reason I am interested in the techniques used in NZ and Australia is because of the potential to increase profitability by adapting some of their techniques to our farm.

For some reason, it seems to me that NZ and Australia have some unique and/or money-saving ways of building corral systems, outbuildings, fences, etc. Since you worked in NZ, do you have any more information about their building techniques, grazing systems, cropping sequences, etc.?

Monica said...

Hi Rich -- the ranch I was living on at the time (I wasn't working on it as in farming, I'm not a farmer) was nothing short of enormous. The entire perimeter of the property (it had to be hundreds of square miles) was fenced electrically to prevent escapes. I do remember quite a bit of rotational grazing... moving sheep and cows from one pasture to another. Some of these enclosed areas were actually mountain ranges, so the individual pastures were huge. Of course there were thousands of sheep. But the pastures were so enormous, so the animals would only be moved once a week or so. To my recollection, the owner only had several farm hands and a few herding dogs for a ranch this size.

I agree with you on the subsidies... there's no reason farming shouldn't be profitable without government, just like any other business. So many of the reasons it can't be are these onerous government controls and what people can and cannot sell, supposedly for our own safety, that make it impossible to make a profit unless you're huge. It's so silly -- outlawing something humans have been doing for millenia.

While the system is in existence, though, I don't blame anyone for taking the subsidy money offered them. It's the only way to make money on the subsidized crops for many people, so long as the system remains in effect. And heck, for the smaller farmer, even if one doesn't plant the crops, I would see it as a way to get some of your tax money back. :)

Yeoman said...

"The fact that so many farms consolidated under relatively free-market economics before the FDR era is evidence of this. I think there's a free market historical precedent there for consolidation of farms. (Were there corporate farms at this time?"

I don't think that's correct. There was next to know consolidation, as we'd now understand it, in this era. There were some large entities, but they were the classic "plantation", which was the descendant of an old, and highly flawed, "planter" system, and there were some large corporate ranches at that time. But corporate farming didn't exist.

When "consolidation" occurred, it typically occurred in the context of a small single famer being bought out by a larger one, which is quite a bit different.

Yeoman said...

"So I'm not sure we need to change the way corporations are viewed or treated, so much as we need to change or eliminate the rules altogether that have resulted in such a sharp rise in corporate ag. Get rid of the regulations that create disproportionate cost to small farmers, and eliminate the subsidies that disproportionately reward large farmers (whether corporate or not), and the rest will take care of itself"

We're so used to corporation, that we don't know the advantages we have.

Simply put, there's no way an individual can compete against a corporation, in anything. Corporations allow individual shareholders to band together and be treated, for everything, as a person. They're taxed as a person. The company has liablity as it is a person, but the shareholders do not.

That's why, I feel, that as long as corporations can farm, individual farmers are at a tremendous disadvantage. And that's why no true "laissez faire", or even free market, can exist in an environment when corporations are treated as though they are persons, while the individuals who make up the corporation are free from any responsibility, other than the slight chance of financial loss.

Wal-Mart, a non farm entity, is the best example. No one person, or even one partnership, could have as many stores, with such economic power, as Wal Mart does. Indeed, I doubt that any one individual could avoid the serious labor trouble running a place like Wal Mart, the Wal Mart way, would create for an individual, but which Wal Mart large avoids, due to its insulation from its own acts. This has allowed it to participate in destroying the local "yeoman merchant" in many places, with no negative repercussions.

Corporate farming is the same way. Corporate food production even more so.

Corporations are not people. Why should we tolerate the fiction that allows them to be treated as if they are?

Yeoman said...

"We're so used to corporation, that we don't know the advantages we have."

Sleep deprivation is at work on me, I'm afriad. That should read, "We're so used to corporations, that we don't know the advantages they have."

Suffice it to say, I'm in favor of a free market, but one made up of free men and women, at least in farming. I'll accept corporations as necessary, in somethings, but only in some things that require huge scale.

Otherwise, I'm afraid that I agree with Wendell Berry. Corporations exist only to insulate their shareholders from the impacts of the "corporate" act, and they reduce their employees, if they're big, to machines who have surrendered their ability to act independently. A family grocers is responsible to his customers in a way that Wal Mart is not, but he can't afford to compete against Wal Mart. A individual landowner is free to farm in a way that a corporate employee farmer is not, but he also doesn't have the same sort of resources the corporation does either. And so on.

Yeoman said...

""The fact that so many farms consolidated under relatively free-market economics before the FDR era is evidence of this. I think there's a free market historical precedent there for consolidation of farms. (Were there corporate farms at this time?"

I don't think that's correct. There was next to know consolidation, as we'd now understand it, in this era. There were some large entities, but they were the classic "plantation", which was the descendant of an old, and highly flawed, "planter" system, and there were some large corporate ranches at that time. But corporate farming didn't exist.

When "consolidation" occurred, it typically occurred in the context of a small single famer being bought out by a larger one, which is quite a bit different."

To attempt to clarify my comment here (keeping in mind that I'm so sleep deprived today my writing is making no sense") the consolidation we used to see, in this era, was due to, principally, advancements in machinery, or farm failures due to excessive numbers of homesteads (with the homestead act only being repealed in 1932).

This differs from the huge Mega Farm we see today by quite some measure.

We might still see, of course, very large farms. But we wouldn't see, without corporations, whole collections of large farms under a single corporate owner.

Yeoman said...

I see NZ being linked to Australia here, in terms of farming.

Is that accurate? I'm not sure we should be equating the two.

Mellifera said...

For what it's worth, I understand that (getting back to somewhere earlier in the thread- "Are small farmers starting to have an impact?") that has certainly been the case in Australia. An ag extension guy from down there came and gave a presentation at UF.

Gist of it was, the ag industry groups and their extension service were all out of sorts over a plague of urban refugees starting up small farms who weren't very serious about doing a good job and threatened to breed diseases to share with their professional farming neighbors. This was accompanied by lots of pictures of miserable horses and other livestock in dirt yards.

Then they did one of their decade-ly censuses and realized that a lot of these "hobby farmers" actually meant business. For example, they found that if you were to remove the ring of small-acreage farms around Sydney, 2-3 million people would stop eating vegetables.

WHOA!!

There were also enough people moving out of the cities to do small-acreage farms in rural areas to actually alter the outcomes of some recent Parliamentary elections. Shazam!

Monica said...

yeoman -- I agree with your assessment of the nature of consolidation early-on. I wasn't suggesting that corporate farming was common then (indeed I wasn't really sure) -- just that various conditions at the time made it impossible for some people to continue farming.

I'm rather puzzled by your statements on corporations as a whole, however. Corporations are voluntary agreements between stockholders and the few people that run the business. Is a food co-op invalid or immoral because it is owned by 300 members rather than 1 person, with each new shareholder paying a fee to invest in the business and then the profits distributed to everyone? (That's a very similar concept, though not technically a corporation.) What you are essentially saying is that you would disagree with a group of 100 people in a community coming together to invest in a farm run by a few people, with some of the profits distributed to them later on based on their initial investment (shares). That's the way my vegetable and raw milk co-ops are run.

I sense that you don't like that corporations are *big*. Well, how big is too big? At exactly what point would you decide is the cutoff for a corporation to be "too" big? (Keep in mind single people can incorporate their businesses.) At what point should these voluntary groups that come together to distribute risk and make a profit be outlawed?

"They're taxed as a person. "

What on earth are you talking about? :) Surely you're aware that corporate income in the form of dividends is also taxed on the shareholder level. And there's not just a "slight" chance of loss as a stockholder -- it really depends on the riskiness of the business or how well it is run, as our current financial crisis aptly shows.

You're making it sound as if the consolidation of businesses and farms is somehow inevitable and unstoppable. I'm not really seeing that -- it is in large part something that is government-assisted. If it is impossible for the small farmer to compete against Wal Mart's cheap industrial food, how can we explain the growth of Community Supported Agriculture from $1 billion in the early 90s to a market share of now $12 billion yearly (almost all without government help)? It would probably be even greater by now without all the government regulation that prevents me from buying a loaf of granny's bread at the farmer's market for my own "safety" -- a word now thrown around by government with more regularity than a two-year old throws around the word "no." (In fact I know small agriculture would be more widespread because there is also a soaring demand and supply for raw milk almost everywhere and it's driving the government nuts.)

Even in the mixed economy we have, with our freedom greatly restricted by the government restricting our purchases, people have choices. The fact that most people choose cheap industrial food does not mean they could not choose otherwise all or part of the time -- just as people can make cars or planes with home kits rather than buying them from one of the few large distributors.

I used to eat at McDonald's a lot. I rarely do so anymore, but that's MY choice -- not the activism of Spurlock and others that seek to impose their values on everyone else through the law.

Until peoples' values change, their purchases won't. Trying to force certain choices onto people by outlawing corporations of a certain size or profitability really isn't going to solve anything. (At the least it would just make certain foods more expensive or unavailable and make people resentful -- just as anti-trust laws have done. Just look at the SEC's recent actions against Whole Foods because they are a "natural foods" monopoly. It's absurd. And wrong.)

I'm not a corporatist -- I don't believe in special protections for corporations as so now often happens via the alphabet soup agencies (USDA, FDA, etc.). But the government's job is to uphold the rights of all. Corporations aren't violating anyone's rights simply by gobbling up market share any more than my local farm would be violating someone's rights by being so profitable that they are able to buy an adjacent piece of land to offer more shares to their customers. That doesn't mean I have to like it in all cases, but there's a huge difference between not liking something and wanting to outlaw it.

Rich said...

"...I see NZ being linked to Australia here, in terms of farming.

Is that accurate? I'm not sure we should be equating the two..."

Even though Australia has eliminated some of their subsidies, I guess I was linking the two in terms of the way they adapt their farming and ranching practices to their local conditions (as I see it).

From what I have gathered, farmers and ranchers in NZ and Australia have some unique solutions they use to deal with some of the same obstacles faced in the U.S.

Learning about different techniques like: dealing with drought conditions, a lack of manpower and machinery, or the efficient use of building materials would be helpful to almost any farming or ranching operation.

It would be useful if there was an easy way to find information and comparisons of farms and ranches in a variety of places, such as South America, Africa, Australia, NZ, etc.

Monica said...

Mellifera, that's awesome.

Well, the same thing is happening in the United States, too. I wouldn't say it's that widespread yet, but I do get raw milk and pastured meat from my local farm, myself. Of course, all of this is driving Big Ag and the government nuts -- to my utter delight. THey are really upping the ante -- the world will starve, etc. without their food and technology. "The world can't be fed on organic food." Funny how the CSA market shares in the US keep increasing despite their dire predictions...

Yeoman said...

"They're taxed as a person. "

"What on earth are you talking about? :) Surely you're aware that corporate income in the form of dividends is also taxed on the shareholder level."

I'm afraid that I"m quite aware that's not the case. Corporations can elect to pay dividends, or not. Henry Ford famously commented that Ford wasn't a charity, which is why it didn't pay dividends for decades. And the dividends are the surplus the corporation chooses to pay, or not, to shareholders. Not the profits. More than one publicly traded American corporation today pays no, or next to no, dividends.

As a stockholder in more than one corporation (a hypocrisy I admit), I can assure you that there's no requirement that corporations pay dividends.

And when those are distributed, they are taxed on the individuals income, not on the corporations. The dividend, in turn, is a deduction to the corporation.

Let's take ADM. Do we suppose that the shareholders of ADM receive an annual percentage of its profits, or bear a percentage of its loss? Hardly. They may receive some share of the profit, if ADM chooses to distribute dividends. The losses will be born in the form of decreased stock value, however, a fiction for many shareholders in any event.

That right there (loss)is a significant difference between conventional persons, or partnerships, and corporations. Losses, including those created by bad business decisions, or by legal liability, or whatever, are not really borne by the shareholders, or at least are not in the same fashion as an individual does.

Let's take General Motors. If General Motors goes out of business, what happens to the shareholders? At the very worst, they loose, completely, the value of their stock.

If your business fails, what happens to you? If you are an individual, you are individually liable. Put another way, if an individual farmer goes out of business, his creditors still get to attach his personal bank account, and seize his personal assets, whatever those may be. That sure won't be happening to General Motors shareholders.

That's my essential complaint with corporations. It isn't so much their bigness, as their abiltiy to shirk responsiblity.

A farmer, or any businessman, must always balance his acts against the risk to him personally.

But a corporation, no matter how big or small, need only balance its decisions against its assets, even if its made up of a collection of individuals, which it always is.

Put another way, if you and I get together and decide to buy a farm, and blow it, our creditors will be looking to everything we have.

But if you and I incorporated (and we should, probably, in this example), and blow it, our personal assets are not at stake.

Why is that bad? It insulates us from our own acts, and gives us an advantage against those who can't. There's no personal responsbilty for acts committed by individual people. That's my essential complaint with them.

But I will concede that this does allow for bigness. If one group of people must collectively decide something, that will restrict their size in and of itself. If they surrender the control of their group to a board, that entity can get bigger (and all corporations of any size are controlled by boards). Make it so that one group is made up of people whose personal assets are never at risk (which is the very purpose for forming a corporation), it will necessarily have an advantage over a group, like a partnership, where everyone's assets are still at risk.

"I sense that you don't like that corporations are *big*."

No, as a lawyer, who defends lawsuits all the time, what I dislike, in chief, is that corporations (which aren't remotely likely co-ops) are legally insulated from the impacts of what they do. Corporations are far more able to do acts taht

Yeoman said...

"You're making it sound as if the consolidation of businesses and farms is somehow inevitable and unstoppable. I'm not really seeing that -- it is in large part something that is government-assisted."

I fully agree. I think our disagreement is just in what causes it, or what the cure is. I think part of the government assistance is in the recognition of business forms, which you are disagreeing with. Otherwise, however, I don't disagree.

Yeoman said...

""You're making it sound as if the consolidation of businesses and farms is somehow inevitable and unstoppable. I'm not really seeing that -- it is in large part something that is government-assisted."

I fully agree. I think our disagreement is just in what causes it, or what the cure is. I think part of the government assistance is in the recognition of business forms, which you are disagreeing with. Otherwise, however, I don't disagree."

To add, I also agree with your comment that values have to change.

Where we likely disagree is that I'd also take the more radical step of eliminating corporations (which of course is not going to happen, that'd be far too radical to occur) for most enterprises, for the reasons earlier stated, and I likely would restrict the size or reach of various enterprises, in favor of having more, individually owned, ones. But again, that's highly unlikely to occur.

Yeoman said...

"Rich said...

"...I see NZ being linked to Australia here, in terms of farming.

Is that accurate? I'm not sure we should be equating the two..."

Even though Australia has eliminated some of their subsidies, I guess I was linking the two in terms of the way they adapt their farming and ranching practices to their local conditions (as I see it)."

All agriculture is local in the end, and that's also true of the US. When a person goes from one area to another, it's surprising to see how much practices vary.

Or, on the other hand, how practices in other similar regions, a continent away, are the same.

We must always be cautious, therefore, to accept some practices urged on us in our own countries, while being willing to learn from those far away.

Yeoman said...

While I'm bothering everyone (and I fear that's what I'm doing, which detracts from the overall fine quality of conversation here) allow me to tax everyone's patience with one more example, after which, I'll cease commenting on this topic, no matter how tempted.

And allow me to state my appreciation to Monica and Rich, and the others, whom I hope I am not bothering too much.

Anyway, a practical example of the difference between corporations and other entities, to illustrate the reasons for their existence.

If I am a shareholder in General Motors (which I am not, but which I am actually tempted to become, given as the stock is so cheap), and GM collapses, what does it mean for me, the stockholder?

The most I have risked is the amount I spent to purchase the stock. That's all. I will not owe anything to the suppliers whose bills are not paid. I won't owe anything to the employees who were not paid. I won't owe anything to the pensioners whose pensions are left high and dry. I won't have to pay for environmental cleanup. I'm out what I put in, and that's it.

What if it was a conventional partnership, and not a corporation.

Then anyone GM owed money could collect it from me, and as much of it as they could get from me.

That's the essential difference.

That's why any business of scale incorporates (and justly so, I'm not saying they should not).

And that's why it's so much easier for a corporation to attract investment than a partnership, or private person. If I wanted to start a large business, it would be much easier to go to individuals and promise them that they were not at risk if the business failed, as opposed to letting them know that creditors would be looking to them if the business failed.

It's also why corporations are better risks in all sorts of things.

To be clear, I accept this. Some businesses simply must operate this way, if they're to fulfill their role in the economy. GM has to be a corporation, and we have to accept that.

Farms don't, however. And to the extent corporations, a creature of a legal fiction, are in our economy, having created them, the government can govern their size.

Why would we want to do that? Competition is one reason. In meat packing we're down to hardly any competition right now, and I'd wager that's the case with other product producers. And the government has always accepted this role, at least up until recently. That's why Standard Oil was broken up, or AT&T.

Beyond that, in the wider economy, while I accept corporations as necessary for somethings, they are not for many others. To use the Wal Mart example again, many people must shop there, as their incomes will not allow otherwise. Their incomes are low, in part, because of Wal Marts and other similiar entities. One Wal Mart represents, I'd guess, a half dozen smaller locally owned, middle class, stores in a previous economy. Those stores charged more, but they supported families with greater incomes and actual decent careers. But no store like that would be a publicly traded corporation, and no publicly traded corporation has any interest in being a store like that, controlled by remote shareholders, sort of, with economic interest being their sole reason for owing the shares.

Okay, I'll stop bothering folks on this one now. It's irritating the good folks here, and it's also, I'm afraid, unrealistic as a hope, as much as I might like to see it occur.

Rich said...

Yeoman said - "...It's irritating the good folks here, ...unrealistic as a hope, as much as I might like to see it occur..."

As one of 'the good folks' (at least I hope I am one), the discussion is far from irritating. Your comments cause me to think about the subject, instead of accepting the status quo without question.

In fact, I looked up the difference between a cooperation and a LLC as a result of the discussion and was surprised to learn that the concept of the LLC originated in Wyoming (I believe that is where you are located).

Wasn't late 19th century WY the scene of massive cattle baron corporations that bent the law to suit their ends? Didn't foreign investors tie up large areas of open range and prevent small landowners from operating on "their land", leading to violent range wars?

It is interesting that in the same way that agricultural practices tend to be localized, the interpretation of the law might also be localized to a degree. Past struggles with drought can shape water usage in a area, and past struggles with corrupt corporations might also shape the way a person looks at the law.

Of course, the pragmatic side of me has to ask; if corporations have such unbeatable operating advantages, would it be advisable for a farmer or rancher to just grit their teeth, feed the beast to a degree, and incorporate or form a LLC?

Yeoman said...

"In fact, I looked up the difference between a cooperation and a LLC as a result of the discussion and was surprised to learn that the concept of the LLC originated in Wyoming (I believe that is where you are located)."

Yes, that's quite correct. LLCs were a creature developed by our then Secretary of State. The LLC is a "limited liability corporation", which is governed, more or less, on looser terms than most corporations (except a close corporation) and in which the "members" are taxed like partners of a corporation. Their liability, however, is "limited", like that of corporate shareholders.

"Wasn't late 19th century WY the scene of massive cattle baron corporations that bent the law to suit their ends? Didn't foreign investors tie up large areas of open range and prevent small landowners from operating on "their land", leading to violent range wars?""

Sort of, although that's certain the popularized version of it.

Wyoming's range wars stretched from the 1880s until about 1910. They had more to do with competition for resources (i.e., grass) than they did with business organization. Principally, the initial struggle was over two competing, and government sponsored, views on who "owned" the land. The Federal government encouraged water hole homesteading early on, and the state and Federal government cooperated in a system in which ranges beyond the water holes, for huge distances, on the Federal domain were regarded as the de facto, if not the de jure, of the grazer who first claimed them. However, both the state and the Federal government also encouraged continued homesteading, which busted up that domain. It'd be a lot like what would happen if you recorded your deed down at your county, for your house, but then found that the county felt that you really didn't own your basement, and another, poorer, family could move in there and claim it.

After that, the cattle range war of the 80s and 90s, which resulted in a defeat for the "big" system in favor of continued homesteading, bled into a cattle v. sheep war which went on until about 1910. That's another story, however. The whole question on the Federal domain was ultimately cleared up in 1932, when the Homestead Act was repealed. Then the dust bowl weather did what the "invaders" couldn't, and cleared out a lot of the tiny operations which couldn't survive with too little to graze, or plant, given the drought.

Yeoman said...

"Of course, the pragmatic side of me has to ask; if corporations have such unbeatable operating advantages, would it be advisable for a farmer or rancher to just grit their teeth, feed the beast to a degree, and incorporate or form a LLC?"

The answer is yes.

While I'm arguing against the continuation of this system, it is the system.

That being the case, I see no reason that a person would wish to expose everything they have, when they can limit their exposure.

It's not a good system, in my view, but it is the system. It may be hypocritical to participate in it, but then it's no more hypocritical than fully confessing that petroleum use contributes to global warming, which I firmly believe, and still driving. The reason that I'm comfortable with this is that I do what I can, on a personal level, but I feel that addressing these issues can only be done on a national level.

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