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Farmers for economic freedom

Updates from the Prairie Centre/Centre for Prairie Agriculture in Regina, Saskatchewan.

Hot off the press! Don Baron's Jailhouse Justice and
Canada's Great Grain Robbery
are now available at
http://www.ajagra.com/authors_comment/baron/baron.htm

web posted August 27, 2001

Learning about wealth creation

By Craig Docksteader

If an individual wants to live in most parts of Canada or the US, an understanding of English is essential. An immigrant arriving in the prairie region from Holland, Russia, or Japan, with no knowledge of English, could get by for a season, but over the long haul would have a pretty tough time.

Whether it’s Japanese in Japan, Cantonese in China, or English on the prairies, the ability to speak a common language means an individual can gather and evaluate information in order to make good decisions. Language facilitates movement and constructive interaction. It’s the primary vehicle on which business, social interaction, and even learning is transported.

The knowledge and language of economics does the same when it comes to money and wealth creation, which explains why a comprehensive knowledge of economics is in the best interest of any society.

The fact that thousands of people, including a good number of politicians, are unfamiliar with the particulars of wealth creation, or economics in general, says a lot about available options. It’s true that all people spend and earn money, but that’s about as elementary to economics as saying "good morning" and "goodbye" is to speaking English.

In our part of the country, how wealth is created isn’t even taught in public schools. Despite this, upon reaching the age of 18, every citizen is eligible to cast a ballot in favor of a political candidate who is often elected on the basis of how he or she will handle economic matters.

By way of comparing the prairie region with other parts of the world, consider the understanding of economics that grade school students have in the state of Arizona. Prior to reaching the end of grade six, Arizona children have been taught the opportunity cost of a choice and the role of natural resources, human resources, and capital in the creation of wealth. They will also have an understanding of how price incentives affect peoples’ behavior; how voluntary exchange helps both buyers and sellers; and how entrepreneurs take risks to bring new goods and services into being that never previously existed.

Before completing grade eight those same students will have learned how limited resources and unlimited human wants cause people to choose some things and give up others; how specialization in production improves the standard of living; and how the protection of property rights provides incentives to conserve and improve property, thereby enhancing a society’s overall wealth.

High school students study the role of capital, labor, land, and entrepreneurship in production; the necessity and function of profit; and the role of financial institutions and securities markets. Before graduating, students will also have learned the difference between a command, market, and mixed economy; how the incentives of a free market economy preserve political and economic freedom; how gross domestic product, inflation, and unemployment statistics are determined; fiscal policy and its effect on inflation; the function of the federal reserve system; and how private investment raises living standards for everyone.

Suffice it to say that a 17-year-old graduating from high school in Arizona will be armed with a thorough and comprehensive understanding of the factors that facilitate the creation of wealth. He’ll speak the language -- fluently. Compare that with the understanding of economics and wealth creation that our graduates receive, or even the basic understanding of wealth creation that many of our politicians possess.

It’s a sobering thought.

Craig Docksteader is Coordinator with the Prairie Centre Policy Institute.

web posted August 20, 2001

How to lose markets and lower prices

By Craig Docksteader

You don’t hear too much from Focus On Sabbatical (FOS) these days, but they’re still at it. With about 3,200 members in Canada, the group wants to sign up enough farmers in North America to effect a rise in grain prices by taking land out of production. Spokespersons are currently working to promote the concept in Canada and the U.S., and will be sending representatives to talk to farmers in Brazil and Australia.

The theory behind the plan is simple: Major crop failures result in price increases. Therefore, farmers should work together to orchestrate the equivalent of a major crop failure by taking half of their land out of production. Money which would have been spent on input costs could be plowed into the futures market, resulting in healthy profits as grain prices rise. To pull it off, FOS must sign up enough farmers to take 8 billion bushels out of production.

Not surprisingly, the organization’s biggest obstacle is convincing farmers that their ambitious goals are achievable. Attempting to build an international farm organization which encompasses 40 per cent of North America’s grain-growing land is not only an enormous task, but it defies the independent nature of agricultural producers.

Yet as overwhelming as this obstacle is, it is not the biggest problem with the plan. Ironically, what FOS organizers appear to have overlooked, is the potential impact of being successful.

Imagine for a moment, what would happen if FOS was somehow successful in organizing enough farmers to put their plan into action. Although it’s a stretch of the imagination, pretend it happened. Suppose that in year one, an announcement of a planned shortfall of 8 billion bushels in grain production panicked the markets and doubled or tripled the price of grain (FOS projections). Producers worldwide would be reaping the profits.

Then imagine that FOS members followed through in year two and actually took 50 percent of their land out of production, determined to keep prices high for one or two more years (FOS projections). Imagine the windfall. Suddenly farming is profitable. Growers are taking cheques to the bank, investing in new equipment and buying more land. Everybody’s happy.

There’s only one problem. The high prices in year one changed everything. Growers around the world suddenly recognize that there is big money to be made in grain. Farmers in every corner of the globe begin to switch land to grain production and put fallowed land back into production. Grain supply is on the rise.

This is what FOS seems to have overlooked: Pushing the price up of grain up will result in more production. Year one might be great because prices go high (according to FOS theory) but in year two, when FOS is pulling land out of production, producers around the world are putting more into production. The result in year two is little, if any, decline in overall supply, along with a shifting of markets. Since the grain is not as readily available from previous suppliers, buyers will go elsewhere and Canadian markets could be lost permanently.

Now jump to year three. On top of the new land which has been put into production (and is paying healthy dividends according to FOS theory) FOS members put all their land back into production. Now we have production levels which are higher than ever, prices which are lower than ever, new suppliers in the marketplace, and buyers which have gone elsewhere to purchase their grain. Things will be worse, not better.

There is a growing realization that significant potential exists for greater profitability in farming. This potential needs to be aggressively pursued. But greater profitability will not be realized by following the FOS plan. Not only is the plan unlikely to succeed, but even if it does it will still fail.

Craig Docksteader is Coordinator with the Prairie Centre Policy Institute.

web posted August 13, 2001

Marketplace myths: Do machines cause unemployment?

The belief that machines cause unemployment has been around for a long time. On the prairies, it usually bubbles quietly below the surface amidst the small talk about jobs or falling commodity prices.

At first glance, the idea seems believable. People are constantly inventing new machines and technology which either increase a worker's productivity, or replace the worker entirely. One piece of today's farm equipment can easily do the work that required ten men a century ago. The casual observer can easily draw the conclusion that machines cause unemployment.

But when examined closely, the myth leads to preposterous conclusions, as explained by economist Henry Hazlett in his work entitled, "Economics in One Easy Lesson". Following, are excerpts from Hazlett's observations.

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Adam Smith, a Scottish economist who lived in the 1700's, tells of a pin maker who, in the early days before technology, could only manufacture one pin a day. With the use of machinery however, he could manufacture over 4,000 pins a day. This means that with the advent of technology, thousands of pin makers were put out of work, meaning that the employment rate for pin makers was over 95%.

This was the infancy of the industrial revolution. In the stocking industry, new stocking frames were destroyed by the workers who had previously carried out this task by hand. Houses were burned, the inventors of the new technology were threatened, many of them fleeing for their lives. Civil order was not restored until the army was brought out and the leading rioters were either sent to jail or hanged.

As far as the rioters were concerned, they were thinking only of their own immediate and long term future. They believed that the machine age was permanently replacing workers, but in reality they were mistaken. It is true that thousands of stocking makers were initially displaced by the machine age and the introduction of technology. However, by the end of the 19th century, the stocking industry was employing at least one hundred men for every man it employed at the beginning of the century.

In 1760, it's estimated that there were 5,200 cotton spinners in England, using spinning wheels, and 2,700 weavers. In all, there were 7,900 people employed and making a living in the production of cotton textiles. The introduction of the cotton spinning machine was vigorously opposed on the grounds that it would take away the livelihood of these workers. In fact, the opposition to the machine was so strong that it had to be put down by force. Yet in 1787, twenty-seven years after the invention appeared, a parliamentary inquiry showed the number of persons actually engaged in the spinning and weaving of cotton had risen from 7,900 to 320,000, an increase of 4,400%.

The reality was that because of the declining price of cotton goods, consumption skyrocketed. Citizens and consumers who previously would never have bought cotton, or bought as much, were now able to purchase large quantities of it as a result of the price decline and the enhanced quality.

- - - - - - - - -

Adapted from "Economics in One Easy Lesson", by Henry Hazlett. "Where Do We Go From Here?" is a feature service of the Prairie Centre Policy Institute.

web posted August 6, 2001

The high cost of environmental over-regulation

The following is excerpted from "This Land is Whose Land?", by U.S. author Linda Bowles. Originally published in the U.S. on June 9, 2001, the article illustrates the high cost of environmental over-regulation.
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In his 1992 best-seller, The Way Things Ought To Be, Rush Limbaugh wrote: "...The environment is a great way to advance a political agenda that favors central planning and an intrusive government. What better way to control someone's property than to subordinate one's private property rights to environmental concerns."

At the time, this sounded like hyperbole. But it wasn't. Limbaugh's warning was worthy and prophetic. I realized this a few years ago when I came across a story concerning Taiwanese immigrant Taung Ming-Lin, a farmer in Kern County, Calif., who was arrested for allegedly running over an "endangered" kangaroo rat while tilling his own land. His tractor was seized and held for over four months, and he faced a year in jail and a $200,000 fine. A U.S. Fish and Wildlife agent asserted, "We're the caretakers and the stewards of the land, and we have no right to deny the existence of these endangered species."

As time has passed, it is now clear that what happened to the farmer in Kern County was not an anomaly, but part of a developing pattern of government invasion of private rights. What the Fish and Wildlife agent said was not just a misguided personal opinion; he was stating official U.S. government policy. On April 7, 2001, the federal government's Bureau of Reclamation cut off irrigation water to 1,500 family farms in the Klamath Basin on the Oregon-California border. Based on "citizen lawsuits" filed by environmental activists, all the available water will go to save fish, primarily the sucker fish. A federal judge denied an appeal by the farmers saying, "Congress has spoken in the plainest of words, making it abundantly clear that the balance has been struck in favor of affording endangered species the highest of priorities."

Another endangered critter wreaking damage in California is the fairy shrimp, which thrives in what environmentalists call "vernal pools" and what ordinary folk call standing water or mud puddles. Anyway, when these puddles evaporate, the fairy shrimp eggs nest in the mud until the next seasonal rains hatch them. Apparently the deal is this: if you drain or spray standing water, you get an award from the Mosquito control people and a summons from the Fairy Shrimp police.

The protection of these "vernal pools" is a nightmare to California farmers, developers, and even local governments. For example, environmental concerns for the shrimp cost Fresno County a six-month, $250,000 delay in the construction of an important freeway. However, that's cheap compared to the undisclosed cost of moving the site of a major new University of California campus in Merced, Calif., because there are too many vernal pools on it. California is the nation's largest producer of food crops and commodities, including fruits, nuts, vegetables, melons, livestock and dairy products. This massive agricultural industry depends entirely on irrigation for water. In California, rainfall is slight or non-existent from early May to mid-October.

Land regulations, fuel costs and electrical shortages are disastrous to farmers. But the most critical issue for them and for all Californians is water. The eco-inspired ban on the construction of dams and water storage facilities to catch the runoff from winter rains and spring snow melts is limiting the supply of water even as demand for it is surging. It is a disaster in the making.
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Excerpted from "This Land is Whose Land?" by Linda Bowles. "Where Do We Go From Here?" is a feature service of the Prairie Centre Policy Institute.

web posted July 30, 2001

Re-thinking open access

By Craig Docksteader

Open access on rail lines for grain transportation sounds like a good idea. Give other qualified carriers the opportunity to have access to privately-owned rail lines so that there's more competition in grain transportation. This will improve productivity, introduce greater efficiency, and cut freight costs. Since freight costs are farmers' single biggest expense, who can argue with that?

But while the objective of attaining greater competition in grain transportation is sound, the model of regulatory open access has a troubling dimension to it: It defies the principle of property rights.

Personal property rights are essential for an economy to function properly. Without them you'll end up with an economy like the former Soviet Union's -- inefficient, over-priced, unresponsive, and effectively bankrupt. Who would buy something with their own money if the government could come and take it away? Who would invest if there was a threat that the government would nationalize the business they invested in? Secure property rights, among other things, promote a healthy, robust economy.

Ironically, nobody in Canada should have a greater appreciation for the value of property rights than prairie farmers -- because nobody in Canada is experiencing a greater assault on their property rights than prairie farmers. From gun control, to grain marketing, to endangered species legislation, prairie producers have been fighting for years to retain what few property rights they have left, and recapture the ones they have already lost. They have been strong advocates of the fundamental sanctity of individual rights and freedoms from which property rights are derived.

Until it came to the railways.

If we're honest with ourselves, we have to admit that regulatory open access effectively means a further trampling of personal property rights. Whether corporate or individual, we're talking about property and investments which belong to people. And no matter how much we may love to hate the railways, promoting mandatory regulated open access is promoting the fundamental injustice that has plagued the prairie grain industry for years. Surely there is a better way.

There are, of course, those who will not agree with this. They unashamedly promote legislation which erodes property rights and results in a deterioration of individual rights and freedoms. Whether out of fear, jealousy, or simple ignorance, they are convinced that it is necessary to promote state control of private property. They have believed the paternalistic, elitist rhetoric that government knows best, and that it's for the greater public good. In reality, however, they usually support such legislation because they perceive it's for their own good -- regardless of what it might cost their neighbour.

There is a clear consensus that western Canada's grain transportation system needs fixing. We need a more commercial, competitive system which is responsive to the needs of farmers. But in the formation of public policy, promoting policies for others that we wouldn't want applied to ourselves, is foolish. If we gain a victory on freight rates by denying our values and further diminishing the property rights of our fellow Canadians who are railway shareholders, I submit that we have won nothing.

Craig Docksteader is Coordinator with the Prairie Centre Policy Institute. "Where Do We Go From Here?" is a feature service of the Prairie Centre.

Prairie Centre/Centre for Prairie Agriculture, Inc.
#205, 1055 Park Street
Regina, SK
S4N 5H4

Phone: 306-352-3828
Fax: 306-352-5833
Web site: http://www.prairiecentre.org
Email: prairie.centre@sk.sympatico.ca


The CFEN needs your help! The battle against the Canada Wheat Board can only continue with your support.

Canadian Farm Enterprise Network
Box 521
Central Butte, Saskatchewan
S0H 0T0
CANADA

Write the following and demand free market rights for Western Canadian farmers!

The Canadian Wheat Board
423 Main Street
P.O. Box 816, Stn. M.
Winnipeg, MB
Canada
R3C 2P5

Telephone: (204) 983-0239 / 1-800-ASK-4-CWB
Fax: (204) 983-3841

Email Address: cwb@cwb.ca

Ralph Goodale
Minister Responsible for the Canada Wheat Board
Department of Natural Resources Canada
21 - 580 Booth Street
Ottawa, ON
Canada
K1A 0E4

Telephone: (613)996-2007
Fax Number: (613)996-4516
Email Address: rgoodale@NRCan.gc.ca

 





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