Sunday, November 14, 2004

Consequences of Infuriating the World, Part XIV

Here's another reason for Farm Belt states to mourn the re-election of George W. Bush: For the first time in 18 years, the United States has been running agricultural trade deficits.. Normally, agriculture is one of the only economic sectors that reliably produces surpluses.

According to the U.S. Department of Agriculture, the U.S. imported more agricultural goods than it exported in June and August, the first monthly trade deficits since 1986, when the Farm Belt was mired in a depression. "It's very worrisome," said Sung Won Sohn, chief economist of banking giant Wells Fargo & Co. "We need agricultural trade surpluses more than ever because the nonagricultural deficit is ballooning."

There are a lot of reasons for this, but here are the ones that are foremost on my worried mind. First, we're irrationally committed to biotech foods, which the EU and many nations utterly reject. Our farmers have been cajoled or bullied into planting GE crops, only to find that they produce a lower yield at a higher cost, and are unwelcome in several important international markets. That's not exactly a recipe for success in the global market.

Second, growing international anger at the Bush administration's arrogance and brutality is leading some international consumers to avoid U.S. products. Thanks to mismanagement and bad policies, we're at a point where even a limited but persistent formal boycott of U.S. produce could hobble our economy, because as Sung Won Sohn notes, agriculture surpluses usually offset deficits in other sectors. In addition to which:
[T]he problem with the widening overall trade deficit is that it is sustainable only as long as foreigners are willing to lend the U.S. large amounts of money. Many economists warn that this isn't likely to continue, and if they're correct, the risks are growing for a market-rattling crash in the value of the dollar.

A lot of the policies that led to this situation were propelled by agribusiness lobbyists with a product orientation rather than a consumer orientation; in other words, they forced the market to accept (and government to subsidize) what they produced, instead of producing things the market wanted. Not surprisingly (to anyone who's not a lobbyist or a Bushophile economist), the lobby's financial and political interests are suffering partially as a result of its own efforts:
During the 1990s, the agriculture sector's ability to single-handedly cut the trade deficit by as much as 16% some years gave it political capital in Washington, helping justify billions of dollars in annual farm subsidies. Now, agriculture's shrinking impact on the trade scene, plus the swelling federal budget deficit, could make it harder for the farm lobby to protect those subsidies.

Isn't it funny how that works? This is yet another example of how refusing to change course because of concerns over short-term economic issues can lead to far more significant long-term losses. Despite the fact that business writers make millions explaining the concept of adaptation to change in kindergarten-level books like Who Moved My Cheese?, the lessons never seem to stick.

Some experts are saying that we'll soon see full-year agricultural deficits. If that disaster happens, something tells me that the Midwestern "moral values" crowd will avoid blaming Bush for any part of it, and will see it instead as Yahweh's revenge against lesbian atheists.

3 comments:

paida said...

Eva from Atrios here. Thank you this was very interesting. I say that as a former midwesterner- my hometown is a small farming town and this could have huge implications there.

I have read a few things here or there about the Chinese and others may grow weary in the near future of financing out debt. Like so many other stories out there this is one that really should be getting more attention. I mean I realize that the potential collapse of our economy is not as important as the Scott Peterson verdict, but you think it could get a mention.

No reason to check my homepage since it is not up and running yet...

paida said...

OK, I now realize why one should "preview" before posting a comment. I really am not quite as big of a moron as my typos would imply. I guess that means it is late and time for bed!

Anonymous said...

The way the Bush administration has handled both GM crops and uninspected US beef is the same. The marketing of the product developed is to strong arm friendly countries to take the unwanted product.

Checked the shelves at the expat grocery and US beef is absent from their shelves. It wasn't that way a year ago. Haven't checked on the import ban here in Hong Kong, but I know that Bush has been keeping the pressure up on Japan without a lot of success.

Tom - Daai Tou Laam