Posts Tagged ‘agriculture’


Many of my well-intentioned students are in awe of Bill Gates. He’s a rich guy, a successful businessman, who is giving away a large portion of his income to help solve the world’s economic and social problems through the Bill and Melinda Gates Foundation. What could be more admirable?

I do remind them that it’s Gates alone who gets to decide what the problems are, what the solutions are, and how those solutions will be enacted. We’ve seen that already in the area of education reform. The rest of us have no say in the matter. In other words, it’s the problem of philanthropy in an increasingly unequal country and world.

One of the areas in which the Gates Foundation has been allocating more and more money is food and agriculture, especially the problems of hunger and agricultural production in Africa, guided by the motto of “Listening to farmers and addressing their specific needs.” In 2007, it spent over half a billion dollars on agricultural projects, and has maintained funding at around this level. Since spending so much money gives the foundation significant influence over agricultural research and development agendas, the folks at GRAIN [ht: mfa], a “a small international non-profit organisation that works to support small farmers and social movements in their struggles for community-controlled and biodiversity-based food systems,” decided to look into where the money is going and what it’s being spent on.

What they discovered is that, first, the Gates Foundation fights hunger in the South by giving money to the North.

Roughly half of the foundation’s grants for agriculture went to four big groupings: the CGIAR’s global agriculture research network, international organisations (World Bank, UN agencies, etc.), AGRA (set up by Gates itself) and the African Agricultural Technology Foundation (AATF). The other half ended up with hundreds of different research, development and policy organisations across the world. Of this last group, over 80% of the grants were given to organisations in the US and Europe, 10% went to groups in Africa, and the remainder elsewhere.

Second, the Gates Foundation gives to scientists, not farmers.

the single biggest recipient of grants from the Gates Foundation is the CGIAR, a consortium of 15 international agricultural research centres. In the 1960s and 70s, these centres were responsible for the development and spread of a controversial Green Revolution model of agriculture in parts of Asia and Latin America which focused on the mass distribution of a few varieties of seeds that could produce high yields – with the generous application of chemical fertilisers and pesticides.

We could find no evidence of any support from the Gates Foundation for programmes of research or technology development carried out by farmers or based on farmers’ knowledge, despite the multitude of such initiatives that exist across the continent.

Third, the Gates Foundation buys political influence.

Does the Gates Foundation use its money to tell African governments what to do? Not directly. The Gates Foundation set up the Alliance for a Green Revolution in Africa in 2006 and has supported it with $414 million since then. It holds two seats on the Alliance’s board and describes it as the “African face and voice for our work”. . .

AGRA intervenes directly in the formulation and revision of agricultural policies and regulations in Africa on such issues as land and seeds. It does so through national “policy action nodes” of experts, selected by AGRA, that work to advance particular policy changes.

Finally, the Gates Foundation is not listening to farmers.

Listening to someone, if it has any real significance, should also include the intent to learn. But nowhere in the programmes funded by the Gates Foundation is there any indication that it believes that Africa’s small farmers have anything to teach, that they have anything to contribute to research, development and policy agendas. The continent’s farmers are always cast as the recipients, the consumers of knowledge and technology from others. In practice, the foundation’s first guiding principle appears to be a marketing exercise to sell its technologies to farmers. In that, it looks, not surprisingly, a lot like Microsoft.

Thanks to GRAIN, we now have another example of the problem of philanthropy in an age of growing inequality.


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The current situation—what I continue to refer to as the Second Great Depression—presents a real problem for mainstream economists. Corporate profits (and, with them, the stock market and salaries at the top end of the income distribution) continue to soar while workers’ wages stagnate (based on high levels of unemployment and a declining value of the federal minimum wage).

Clearly, the modeling tools of mainstream economics are useless in analyzing these trends. For example, the only way you can get involuntary unemployment in a neoclassical world is for wages to be too high (that is, above the equilibrium wage rate), such that the quantity supplied of labor is greater than the quantity demanded of labor.

This has forced an economist like Paul Krugman to look elsewhere and to stumble on a tradition that looks a lot more like Marx and Kalecki than traditional neoclassical (and, for that matter, Keynesian) economics. In this alternative tradition, there’s a fundamental conflict between labor and capital, the Reserve Army of labor regulates the level of wages, and corporations prevent the state from enacting the kinds of stimulus measures and social programs that would decrease the economy’s dependence on the “state of confidence” of private employers and investors.

The question is, how does one model fundamental features of the Second Great Depression in this alternative tradition? Krugman seems to think he can do it in with an efficiency-wage model. But, remember, that model was invented to make sense of situations in which employers offer wages above the equilibrium wage rate (in order to purchase worker loyalty, decrease “shirking,” and increase effort) and, by extension, employers choose not to decrease wages as much as they might in the face of massive unemployment.

But the problem, as I’ve explained before, is not downwardly rigid nominal wages but upwardly rigid real wages. That is, even as the economy recovers, firms are not willing to bid up the prevailing wage rate. As a result, real wages remain constant while, with increasing productivity and economic growth, corporate profits rise. The real coordination failure is exactly the opposite of the one posed in the efficiency-wage story: each employer actually wants to pay the lowest wages possible, while hoping that all other employers offer higher wages, in order to buy back the goods and services being produced. All you need to do is work through Nick Rowe’s attempt to use an efficiency-wage model to make sense of Krugman’s problem to realize it’s probably not going to get us very far.

So, if the efficiency-wage model is a nonstarter, where else might we look? One possibility, it seems to me, is the labor-surplus model first developed by W. Arthur Lewis. I understand, the purpose of that model was quite different: it was designed to make sense of “dual economies” in which peasant workers trapped by “disguised unemployment” and receiving a “subsistence” wage (equal to the average product of labor) in the “backward,” noncapitalist rural/agricultural sector could be induced via a higher “industrial” wage rate (equal to the marginal product of labor) to move to the “modern,” capitalist urban/manufacturing sector, which would absorb them as long as capital accumulation increased the demand for labor.


That’s clearly not what we’re talking about today, certainly not in the United States and other advanced economies where agriculture employs a tiny fraction of the work force (and much of agriculture is organized along capitalist lines). But, in my view, a suitably modified labor-surplus model might be a better starting point than the efficiency-wage model for making sense of what is going on in the world today.

What I have in mind is redefining the subsistence wage as the federally mandated minimum wage, which regulates compensation to workers in the so-called service sector (especially retail and food services). That low wage-rate serves a couple of different functions: it’s a condition of high profitability in the service sector while keeping service-sector prices low, thereby cheapening both the value of labor power (for all workers who rely on the consumption of those goods and services) and making it possible for those at the top of the distribution of income to engage in conspicuous consumption (in the restaurants where they dine as well as in their homes). In turn, the higher average wage-rate of nonsupervisory workers is regulated in part by the minimum wage and in part by the Reserve Army of unemployed and underemployed workers. The threat to currently employed workers is that they might find themselves unemployed, underemployed, or working at a minimum-wage job.

In addition, the profits captured from both groups of workers are distributed to a wide variety of other activities, not just capital accumulation as presumed by Lewis. These include high CEO salaries, stock buybacks, idle cash, and financial-sector profits (with a declining share going to taxes). And, if the remaining portion that does flow into capital accumulation takes the form of labor-saving investments, we can have an economic recovery based on private investment and production with high unemployment, stagnant wages, and rising corporate profits.

Now, I can’t say the labor-surplus model is the only way to model some of the stylized facts of the Second Great Depression. But, to my mind, it’s certainly a better starting-point than the efficiency-wage model.


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Family farming still occupies an important place in the American imaginary, both as the memory of a traditional mode of organizing economic and social life and as an alternative to the rise of corporate farming.

However, as Tom Philpott [ht: sf] reminds us, corporate farming doesn’t much exist. Agribusiness, yes. But the majority of actual farms in the United States are still owned and operated as family businesses.

While there are plenty of mega-corporations in the food industry, they rarely do the actual farming themselves.

A USDA study released in August found that 96.4 percent of US crop farms are “family farms,” or “ones in which the principal operator, and people related to the principal operator by blood or marriage, own more than half.” That number doesn’t leave a lot of room for corporate farmers, does it?

So, given the growing importance of massive, globe-spanning corporations in our food system (think Smithfield, recently bought by the Chinese conglomerate Shuanghui International, Cargill, and Monsanto), why don’t they just take over the fields and farms?

The reality is that farming itself is generally a terrible business. There’s much more—and much easier—money to be made by selling farmers the raw materials of their trade—like seeds, fertilizer, or livestock feed. And there’s also plenty of money in buying farmers’ output cheap (say, corn or hogs) and selling it dear (as, say, pork chops or high-fructose corn syrup). In his excellent 2004 book Against the Grain: How Agriculture Has Hijacked Civilization, Richard Manning pungently describes the situation:

A farm scholar once asked an agribusiness executive when his corporation would simply take over the farms. The exec said that it would be dumb for the corporation to do so, in that it is not free to exploit its employees to the degree that farmers are willing to exploit themselves.


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