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The free market is when you get something for free

by Paul Beingessner
Canadian farmer, writer

(Wednesday, Nov 12, 2003 -- CropChoice guest commentary) -- George Bush's American government is dedicated to promoting free markets around the world. At least that's what it would like you to believe. The truth might be somewhat different. True, the U.S. is determined to turn Iraq into a bastion of free enterprise, and has decided to rewrite Iraqi laws to reorganize its economy to fit that model. But the U.S. appears content to follow the maxim of bad parents everywhere: "Do as I say, not as I do". Nowhere is this more evident than in Bush's handling of the rebuilding of Iraq. Is this being done in the model of the free market, where the best price, the lowest bidder, gains the business? No, it's being done in the best model of pork barrel politics where the Administration's friends procure multi-billion dollar contracts in a secret process hidden from any public scrutiny.

Of course this attitude among American governments is not limited to foreign policy. The American attitude to cotton is another example. Cotton farmers are "batten" a thousand when it comes to collecting government subsidies. In 2001/2002, the 25,000 American cotton farmers pocketed nearly $3.9 billion in subsidies from American taxpayers. Without those subsidies, cotton growers in the U.S. simply wouldn't be able to survive. Or so they will quickly tell you.

Cotton is also produced in many other countries, especially some of the poorest African countries where cotton is the mainstay of some economies. As you might imagine, American consumers use a lot of cotton to stay up with the latest fashions. Hence the American market is attractive to cotton producers but relatively inaccessible since the large subsidies keep production high in the U.S. and prices relatively low.

Cotton is a textbook case for free trade. Poor countries have it and produce it cheaply. A rich country is a high cost producer but produces lots of it anyway because of subsidies that encourage production. Just the place for a good dose of free trade/free market economics. Of course, for that to happen the rich country would have to believe in the free market.

Looking at this from the vantagepoint of a country, Canada, that isn't exactly a mecca for cotton production, it all looks pretty sad. Some of the poorest countries of the world are suffering because world cotton prices are depressed. American cotton farmers rake in billions. Now, in fairness, I suspect those farmers are not all getting rich. The ones who own their land are likely doing pretty well, while the ones that rent or are buying land are likely paying small fortunes for the privilege of farming.

But what really ices the cake in the cotton situation, is that the subsidies don't end with the farmer. It turns out that cotton users, in this case American companies that turn that cotton into cloth, have to be bribed to purchase American cotton. Between 1995 and 2002, the government paid $1.68 billion to these companies under the "upland cotton marketing certificate program". Even that bastion of free markets, Cargill, received more than $87 million to purchase cotton.

Cotton was a hot topic at the failed world trade talks in Cancun, Mexico. Some Third World countries demanded concessions on cotton from the U.S. What they got instead was the suggestion that they grow something else. Cotton became a contributing factor to the failure of the talks.

Hypocrisy, corruption, pork barrel politics, and the rhetoric of free trade seem to go together. None of this is new or surprising to farmers.

Cotton farmers, like farmers everywhere, focus on trying to protect their turf. We all want free trade for our exports and protection from imports. If our buyers can be bribed to purchase our products, so much the better. We've built entire farming systems around these principles.

And it even works occasionally for a few farmers. These are almost always in rich countries. Farmers in poor countries are generally the victims. Mostly, this system is increasingly failing farmers everywhere.

The way farmers conduct their businesses is at the root of their problems. In a free market, low prices discourage production. Farmers, on the other hand, respond to low prices by trying to increase production. They sell their production, as individuals, to a small group of buyers, purchase inputs from a small number of sellers and generally have virtually no market power. They compete for land with any number of investors, hobby farmers and speculators. This situation is true for most of the world's farmers.

Farmers are gradually becoming aware that they can't solve their problems by the simple application of free market theory. Markets are seldom free and the economic powers-that-be seldom really want them that way. If there are solutions to this dilemma, they will be solutions that work for farmers everywhere, not just solutions that appear to work for a few. The global economy has left us no other choice.

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net