Farming Magazine - March, 2012
Opinion: The View from Metropolis
An agricultural forum for the progressive farmers of the Northeast.
Thanks to the Internet, even we amateur historians can now research subjects that once forced professionals to spend years with dusty tomes in library basement archives. For example, a few clicks gets a reader to a well-written commentary (by little-known academic economist Charlotte Twight of Boise State University) tracing the origins of both Social Security and Medicare back to the FDR New Deal of the 1930s. That makes them as old, in concept, as the various economic-intervention programs for agriculture, similarly birthed during the Great Depression, and for the same reason: urban voter demand for then-new "free" services, previously considered by a predominantly rural society to be individual and free-market matters.
However, the U.S. crossed the demographic line to urban majority political control sometime in the post-World War I years, and the data showing the long-expected shift showed up for the first time in the 1920 Census. The Twight monograph's header, "Medicare's Origin: the Economics and Politics of Dependency," suggests this shift in voter expectations for government services, and in later paragraphs in a section titled Political Transaction Costs: A Theoretical Framework, she supports the Plato/Alexander Tyler/Benjamin Franklin point that, under majority rule, the majority can and will vote itself benefits at the expense of the minority. In the 1930s, the new urban majority was ready for "metropolis" books, movies and comics, and dependency on government for food pricing and retirement security, but, she explains, the "transaction costs" for universal health care were too high because of third-party resistance.
In plain language, the medical industry had balked where the farming industry hadn't. The original plan had been for urban majority consumers to enjoy guaranteed supply lower food prices at the expense of producers; for retirees to enjoy cash stipends at the expense of the not-yet retired; and for health care users to enjoy lower prices or zero prices at the expense of not-yet users and medical providers. To this day, only two of the three have worked out, but the third is getting closer: a 27 percent cut in physician reimbursement, avoided each year by means of a "doc-fix" loophole, now appears more probable. Unlike farmers, whose early quits were welcomed, later quit-threats deterred, doctors have credibly threatened to reject low-reimbursement patients and/or quit doctoring. So, many already have that third-party resistance that has succeeded in delaying the goody for users, for whom food prices and retirement costs have risen far less than medical costs. Conclusion: the voter demand/message to vote-buying politicians on food and retirement has been trumped, in the health care case, by provider resistance.
Maybe that's because (humble scribe opinion) there's constant published reinforcement of the food-costs-too-much argument, and not just from the usual suspects in consumer advocacy and Progressive politics. Here are two examples: one from a large-scale government utility, another from a small-scale local business. The big one is the Tennessee Valley Authority, sending out a mailing taking pride, correctly, in the fact that the retail cost of power delivered through local distributors to retail users, was 1.6 cents per kilowatt-hour in 1933, and adjusted for inflation should today be 27.2 cents but is only at 8.5 cents. There are also the usual jibes at fuel and food prices. In 1933, the average U.S. gasoline price was 18 cents per gallon. Since then, the inflation multiplier has grown to 17 so that today gas should cost $3.06 per gallon, which is in fact the local price as I draft this column. Milk, then at 49.6 cents per gallon in Atlanta, should be at $8.43 per gallon today. It's about $3.25. Three basics in 1933 - eggs at 39.5 cents per dozen, chicken at 34.2 cents per pound, and round steak at 42.2 cents per pound, should have been at about $6.72 per dozen, $5.81 per pound and $7.17 per pound by now, but they're all a lot lower: $1.80, $2.40 and $3.40.
As in the '70s, food and fuel again are being blamed, while inflation elsewhere - from college costs to newspaper subscriptions - goes unremarked. The beleaguered Postal Service is deemed inflationary, but the 3-cent stamp of 1933 should be 51 cents today. It isn't.
The small one is a local auto repair shop, which publishes "Braking News" a customer mailer. The lead article, "What a Difference a Century Makes," recites some prices and wages from 1911. For example, eggs at 14 cents per dozen, wage labor at 22 cents per hour, annual earnings at $300. But it doesn't recite what today's adjusted-for-inflation equivalents would be. The 1911-2011 multiplier, the calculator says, is 23.7, so the eggs should now cost $3.31, the hourly wage should be $5.21, and the annual earnings should be at $7,110. They're not: the food item is far behind inflation, the wages and earnings even farther ahead. The "Braking News" reader gets only the first half, what he is already primed to believe, about food costs seeming to outrace urban-consumer purchasing power, and not the factual second half, which disproves it.
In multiple other venues, some described in these columns, the food-buying residents of Metropolis are encouraged to view farmers as (a mix of New York Times op-ed lingo, here) "limousine-driving paid-not-to-grow plant-vacation-and-harvest" abusers of their helpless urban customers. The view of real economists is quite different, but no effort, not even by farm groups and advocates, is made to enable consumers to contemplate it, so it remains (by official, politically driven, vote-seeking policy?) a fairly well-kept secret. Consider, for example, the 1997 report (not widely read in most of Metropolis) entitled "Time Well Spent" from the Dallas Federal Reserve. Here are some sample lines.
"Calculations of the work time needed to buy goods and services use the average hourly wage for [manufacturing] production. A century ago, this figure was less than 15 cents an hour. By 1997 it had hit a record $13.18 ... earned by the great bulk of American society. ... In terms of time on the job, the cost of a half-gallon of milk fell from 39 minutes in 1919 to 16 minutes in 1950, 10 minutes in 1975 and 7 minutes in 1997. A pound of ground beef steadily declined from 30 minutes in 1919 to 23 minutes in 1950, 11 minutes in 1975 and 6 minutes in 1997."
More examples follow, and the section closes with this summary: "A sample of a dozen food staples - a market basket broad enough to provide three squares a day - shows that what required 9.5 hours to buy in 1919 and 3.5 hours in 1950 now takes only 1.6 hours." The Fed's authors should have (humble scribe opinion) used these stats to explain the extraordinary drop in "percent of household income spent on food" as wages went way up and adjusted-for-inflation food prices went way down, so that families of my grandparents' generation were spending nearly half their earnings for food, and now it's less than 10 percent. Yes, milk at today's $3.25 seems more expensive than milk at 50 cents a century ago, but those who complain about the nominal price increase wouldn't surrender any of their own much larger percentage wise wage increases. When you question either the writers of such "food-costs-too-much" screeds, or their readers, you swiftly realize that they fully realize, but just dismiss, the underlying facts. Two remarkable conclusions: the message prevails anyway, and the industry most affected, commercial agriculture, does next to nothing to rebut it. Metropolis lacks a Clark Kent from the public relations planet of Krypton to bring the views of its high-rise (and even its suburban) residents closer to economic reality. And commercial farming hasn't produced a bespectacled mild-mannered reporter to counter the politically useful screeds, either. Long before the medical industry informed Washington that it simply wouldn't accept the less-pay-for-more-work prescriptions (pun intended) aimed at buying urbanite votes via a new set of governmental freebies, the farming industry, after a few strikes and holding actions that drew down remarkable governmental retaliation, went to Plan B: off-farm household income. It's the fallback that has been adopted by some private practice doctors as well, as insurance and staffing costs have grown faster than patient billing rates. But there's a Plan C in medicine: the flight from sole practitioner to corporate-employee status. The Ohio State website reports that under 50 percent of docs are sole practitioners now, down from 66 percent as recently as 2005. So far there have been no urbanite howls of protest over "the threat of corporate medicine" to match their uproar over the "threat of corporate farming" in the '70s. That was also the decade in which government agencies - the USDA and the SEC - were deployed to suppress the other potential threat to low-cost-food, the uniquely aggressive price achievements of the National Farmers Organization in (very briefly) moving milk and some grain commodities from traditional and less-profitable markets to newer and more-profitable ones.
The sophisticated view from Metropolis was then, and still is, that weakly organized sole practitioners wield less goods and services pricing power than corporate practitioners in agriculture then and in medicine now, but it doesn't quite explain why the present-day vote-seeking advocates for lower-cost medicine have so far pretty much failed while their earlier counterparts advocating for lower-cost food have pretty much succeeded. Perhaps a small missing link is the Florida picture, where farmgate milk prices are highest in the nation, in part (humble scribe opinion) because Florida dairies are also highest in corporate organization, where the accountants won't let the executives ship milk at continued losses. Interestingly, Florida is one of the more highly urbanized of the 50 states, and yet it was Corn Husker Nebraska that placed limits on corporate ag, not Mickey Mouse Florida. Maybe the most serious threat to the view from Metropolis is one of the of 195 million websites you'll see under "doctors going corporate," The Million Med March. There you'll find, in health services terms, the same complaints as those of farmers in commodity-producer terms. Maybe it's inevitable, in a nation dominated by its Metropolis voters, that sole practitioners (think the "save the family farm" bumper stickers in New England) in both ag and medicine are becoming endangered species; or maybe the docs will find a way to protect their entrepreneurial status even while using corporate shelter as a regulatory defense. Perhaps a lesson in the making for farmers.
The author is an architect and former farmer.