(Bloomberg Opinion) -- Elizabeth Warren’s latest position paper, on agricultural policy, is a disappointment on two fronts: too wonky to be considered a purely political document, but not nearly wonky enough to be defensible in terms of substance.
The most striking feature of her team’s plan, called “Leveling the Playing Field for America’s Family Farmers,” is what it doesn’t call for: namely, an abolition of farm subsidies, a reform favored by virtually all economists. Those payments often run more than $20 billion a year, and are typically considered an inefficient form of crony capitalism.
Understandably, not many politicians push for this reform, especially given the first-in-the-nation Iowa caucuses. Still, it is a sign that neither expertise nor economics is in charge here.
The third sentence of the document cements this impression: “Last year, farmers got less than 15 cents of every dollar that Americans spent on food — the lowest amount since the Department of Agriculture began tracking that figure in 1993.” Yet according to standard economic reasoning, falling farm costs are a good thing, even if it means lower incomes for farmers and more people leaving the sector. The flight of labor from agriculture and the declining cost of food are signs of progress in every economic development story.
Warren’s document asserts that “food prices aren’t going down.” That’s true but misleading. When the Federal Reserve is targeting near 2 percent inflation, most prices in the economy will rise steadily over time. The link behind that claim, to a U.S. Department of Agriculture report, offers some recent data, but it is hardly damning: In 2018, it notes, retail food prices rose 0.4 percent. “This was the first increase in 3 years, but the rate was still below the 20-year historical annual average of 2.0 percent.” Or how terrible are these numbers, from the same report: “In 2019, price growth may continue to remain low at the grocery store. Food-at-home prices are expected to rise between 0.5 and 1.5 percent, as potentially the fourth year in a row with deflating or lower-than-average inflating retail food prices.”
A look at the longer-term historical data also shows slow, steady inflation in the food and beverage sector, rather than a recent crisis of price spikes. Food price inflation does become higher after 1973, but that is probably due to higher energy prices and the more general productivity slowdown that has plagued the U.S. economy.
In this context, Warren’s lengthy complaints about monopoly and market power in the food sector just don’t seem that persuasive. Furthermore, America’s food sector has been remarkably innovative in terms of product choice and rising diversity of options.
Warren also is calling for greater protectionism. She doesn’t want foreign beef to be eligible for a U.S. label if it was processed here but not made from animals in this country. Such a change would counter the intent of some earlier World Trade Organization rulings, designed to open the U.S. market to foreign competition. Warren suggests that the ruling “undermines American beef and pork producers,” but of course that is generally true when domestic producers face foreign competition. It is sad to see Warren joining what is essentially a Trumpian campaign to weaken global rules for freer trade.
The plan also calls for banning foreign ownership of and investment in U.S. farmland, another protectionist move and at variance with the general consensus among economists. I, for one, do not think it jeopardizes U.S. national security if “one in four American hogs has a Chinese owner,” as Warren claims. It not as if they can starve us by airlifting the pigs out of the country.
On some issues Warren might be correct, such as the need for a so-called right-to-repair law. “Many farmers are forced to rely on authorized agents to repair their equipment,” her plan reads. “Companies have built diagnostic software into the equipment that prevents repairs without a code from an authorized agent. That leads to higher prices and costly delays.” A right-to-repair law has become a minor but fervent cause in some farming communities.
There is a good chance I could be persuaded here. Still, I would like to see whether farm equipment that’s easier to repair might also be easier to hack, or whether open access to the repair codes might also harm intellectual property enforcement for the underlying software.
More generally, I wonder about the effectiveness of this kind of detailed policy proposal. Warren arguably has been the most policy-obsessed Democratic candidate, but so far it has not translated into popular support. If American voters want to be inspired, then opposing seed-company mergers won’t be nearly enough.
To contact the editor responsible for this story: Michael Newman at mnewman43@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."
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