Gene Logsdon and Friends

Economic Awakening: Corn Can’t Grow Like Money Grows

In Gene Logsdon Blog on November 16, 2011 at 5:30 am

From GENE LOGSDON

Judging by the large number of thoughtful comments that followed my claim two weeks ago that farming is not a capitalistic venture and never was, I’d say more and more people are realizing how that boring old subject of economics rules over us all. While that remark echoed my opinion, it was almost a direct quote from Dwayne Andreas. Mr. Andreas is not a socialist, not a wild-eyed occupier of Wall Street, not a Zen Buddhist mystic, not a far out, left wing liberal. Now retired, he was the head of Archers Daniel Midland for many years, one of the largest and most successful agribusiness companies in the world. He made that observation about a decade ago and was widely quoted because the press was totally taken aback that a successful businessman like him would say something like that. If anyone could claim to be both a genuine capitalist and an informed expert on industrial agriculture, it was Mr. Andreas. He was also in a unique position to make that statement because he was known as one of the biggest contributors to our two major political parties—mostly to the Republicans but also to Democrats. As all capitalists know, (or socialists or whatever), it is necessary to play both sides of the political aisle to assure favorable legislation no matter which way the wind blows.

As many of the respondents on this website have pointed out, the so-called civilized world stumbles along on economic theories and theorems that partake of both socialism and capitalism. There is just no way in the real world to avoid doing so because whether a country is considered to have a more socialistic economy, like say, Canada or Sweden, or a more capitalistic economy, like the United States, all of the industrial world today practices economies that function on the idea that money can grow in value by manipulative interest rates.

I don’t hear anyone explicitly suggesting that the culprit in our economic woes is money interest even though all of our major religions, particularly Christianity and Islam, insisted for centuries that interest on money was immoral. ALL interest on money was usury. And supporting that view, philosophers and writers from every culture and era cautioned over and over again the folly of borrowing money. Wrote John Ruskin in 1866: “Borrowers are nearly always ill-spenders, and it is with lent money that all evil is mainly done and all unjust war protracted.”

But the human race is incapable of resisting the allure of borrowed money or the wealth that can be piled up from lending the stuff. Money is an extremely handy invention. It is certainly convenient to be able to buy a car with money than to have to haul a semi load of corn to town to trade for one. But the very bulkiness of barter is the key to keeping trade honest. Once value is determined in terms of pieces of paper or instantaneous electronic impulses, rather than in terms of real goods, the mischief begins. We can vary the rate that money “grows” in a way that nature can’t match or accommodate. Corn grows at its own sweet natural pace, subject to the whims of the weather; money can be grown at any rate the moneychangers want it to grow or not grow. This strange foul brood never seems to die like real life in nature. With money, we have created a monster. That is the basic reason why agriculture in an economy based on money growth rather than natural growth will always have to be subsidized.
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  1. Perhaps we should all borrow to the hilt and then default. It would be an interesting experiment…

  2. while farming may well not be a capitalistic venture, neither would it be a socialistic venture, at least in the ways we’ve come to think of those two things. It is a new paradigm we need, or perhaps an old one. And yes, to not borrow, or lend, money.

  3. Deb – I think that experiment is being tried at the moment, actually…

  4. I was with you up until the last sentence, ” That is the basic reason why agriculture in an economy based on money growth rather than natural growth will always have to be subsidized.”.

    I don’t see how you got to that conclusion. I know just enough about economics in general and agricultural subsidies in particular to be dangerous, so I’m going to refrain from making any statements on the subject for now. I would really like to know though how you get from “money, and interest rates in particular, are artificial things that are easily manipulated, but agricultural production is not” to “therefore we must always subsidize agriculture.”. My impression is that you have historically been against most agricultural subsidies due to the havoc they they cause in the economics of agriculture. This seems like a big turn around.

    • Quentin: I didn’t mean that I am in favor of subsidies, only that they will always be there in some form in a money economy. I am against subsidies too because invariably they benefit the rich landowner and hurt the small family farmer. Gene

  5. Gene

    it will be interesting to see what happens with Italy and Spain in the next 5 – 10 years. The governmnet bond markets are reaching a level the U.S. will see in the next 5 years and that is 7 – 13%. which means the cost to borrow for land and plant the crop will significantly increase. what does that mean to the consumer? Dramatically higher consumer costs. The high cost of fuel charges may become insignificant in comparison to interest charges. Do you recall the last time this happened, when farmers over extended themselves and interest rates went to the moon? mid 70’s and early 80’s. In Canada land prices do not reflect the return on commodities. There are few grain farmers that actually own their land, it is leased( bad idea). which means they need to buy larger equipment which has a depreciating value ( huge risk) and the Wheat Board of Canada has been abolished( no protection for commodity pricing) and the farmers average age is over 55.
    What knuckle head is going to go for a risky deal like that? high interest rates, no chance to own land at a price that reflects commodity returns and purchasing depreciated value equipment at very risky interest rates? if we are planning on eating in the next decade the governmentt has no choice but to jump in and create another subsidy which will in effect raise the price on the subsidized item. we’ve been doing it with land in the past decade with low interest rates and are now paying the price. The future farmer will be left in a position of servitude to the land owner, REITS ( another extremently dumb idea, especially those invested in agricultural land)
    I’m rambling and I know it, but it’s like a dog chasing its tail.
    Corrective action required:
    Land prices need to reflect commodity pricing ( within reason)
    Farmers need to give their head a shake. Say no to the purchase of over priced land.
    reduce the size of land exposude by deversifying assets and services.
    No we do not have to feed the world. it is our job ot teach others to feed themselves not to take on the full responsibility.

  6. I’m not so sure Andreas was a “genuine” capitalist. I’d call him more of a “crony” capitalist who was very successful at the game of political corruption, all perfectly legal of course, where the rules of the game are rigged to benefit those with the biggest campaign contributions and the highest paid lobbyists.

    This has enabled ADM to shape public policy to their benefit. All those agriculture subsidies haven’t done much for farmers but they were great for the nepotistic Andreas clan. They got you and me to support the farmers so they could buy the crops cheaper.

    The Free Market! Capitalism for the revenues and profits, but socialism for the expenses and losses.

    And when all this just wasn’t enough to satisfy their greed, Archer Daniels Midland acted illegally, for example, breaking environmental laws (because it’s cheaper to pay the fines than to comply with the law), and engaging in price fixing and market manipulation.

    Why do we put up with this crazy corrupt system? We need some contrary thinking about this.

  7. I think it’s really important to include Jews in the major religions that consider usury immoral!

  8. “I don’t hear anyone explicitly suggesting that the culprit in our economic woes is money interest ” People ARE explicitly suggesting it. Look at Ron Paul’s and Tom Greco’s books, for example. While the argument that interest per se is always bad is not one these guys will necessarily take up, they are shouting from the roof tops that artificial growth of the money supply (not tied to real wealth creation) and manipulated interest rates (not backed by real savings) are causing untold damage and need to be at the center of any real reform as a necessary condition for social justice. Greco has written extensively about existing money systems, as well as new ideas, that can eliminate the need for interest.

  9. The classical text is about interest or usury is found in Deuteronomy 23:19. One major Christian leader–John Calvin–suggested that this applied to necessities, hence the references to food or money.

    Often condemned (or lauded) as the father of capitalistic thinking, he is much more attuned to the idea that human needs always trump money. So sad that so many of his followers and successors think differently.

  10. Gene,

    No doubt your comments about compound interest, or any kind of interest, hit a nail on the head, but its not the only nail holding this shit together. Some years ago I heard a small party presidential candidate remark…”they call it interest…I call it interestING” and went on to explain the reality. But many economic analysts and commentators, at least among the ones who are not directly involved in propagandizing and apologizing for the status quo that comprise the great majority, distinguish a 3 legged stool consisting of compound interest, debt based fiat currency and the paradigm of infinite growth as what is responsible for bringing all of humanity to the edge of the cliff. Before anyone lays an egg, let me just say that ‘infinite’ is the term commonly used, and simply denotes unending growth. If the stool had only a single leg it would have to be growth, not interest, as compound interest is simply the infinite growth of money and debt based fiat currency is the same deal in regard to the creation of money. And therein lies the rub, as most would surely give up mom, apple pie and furry cuddly things before they’d let go of the insane worship of growth. There’s a wonderful and powerful commentary on unending growth that is as accessible as Google and You Tube, and as simply understood as a poem by a 4th grader, by UC Boulder prof Albert Bartlett. More compelling than drugs, sex or borrowed money (so I’ve heard). It’s called ‘Arithmetic, population and energy’ and I dare anyone to watch it.

    Now then, sir–that’s you, GL–I have a bone to pick. By what criteria other than amassing enormous amounts of money without doing any useful or productive work to get it, do you define ADM as “successful”? I don’t mean that as a rhetorical question. I really think I’d like to hear what an honest and thoughtful person such as you is measuring and weighing out such that successful and ADM can come out or your mouth/pen/keyboard at the same time. Since you invoke various religious teachings and traditions in the matter of interest and usury, wasn’t it Jesus who handed out AK47s to his posse and then met at the temple to sort things out? Didn’t summudy say something about camels and the eye of a needle? Did the Buddha or Martin Luther or Martin Luther King or the Dalai Lama or Moses dispute such notions? Was the ‘right’ to amass wealth without performing useful labor what motivated Nelson Mandela or Harriet Tubman or Crazy Horse? C’mon dude, you know better and care too much to be giving crap like that airtime.

    Okey dokey then, on a completely different tack…I just finished reading what I call your water books…the one on ponds and the one on aquaculture which gave me lots of ideas and insights for my own little patch. Other than to acknowledge the entirety of that contribution, the only thing I’ll say is to acknowledge how jealous of you I was that it took me until high school to discover hockey. Finally there was something to do with my knees and elbows and hips outside of the cafeteria line. Also just put down your book that I call slick tricks and nifty shit that you titled in a less imaginative way, but very useful inside the cover as well. Guess I’ve avoided my appointment with the cold and the critters long enough. Good thing we don’t live down the road. The only that would ever get done is hips and elbows and the machinery would rust up and all the critters would starve to death.

    • Well, okay, David, I should have said that ADM was successful “by worldly standards.” And yes, from what you write, I agree that if we lived down the road from each other, we’d never get much done except talk. And laugh. Gene

  11. Call me simplistic, but it isn’t the money itself that is evil, rather the interest on (love of) money that is the problem. The reason my grandfather was able to keep his small farm in the hills of Arkansas during the depression was because he NEVER borrowed money. He plowed with two mules while everyone else borrowed money for a tractor.

    • Reminds me of a memorable quote from the movie, Sweet Land, uttered by the main character when a banker offered to mortgage his land so he could help his friend out of financial difficulties: Farming and banking don’t mix.

      (By the way, I highly recommend this movie, the story of farming in the prairies and the prejudice in the Norgegian farming community that greets a German mail-order bride during WWI.)

  12. Can we go back to talking about shit in the outhouse again? This money stuff is soooo depressing.

  13. As I tell my kids: when you borrow, you have sold your future for the sake of having something NOW. the assumption is that by ‘having now’, you can use that something into the future to create more value than the cost of what your borrowing.

    the only problem is: who are you to know what your future will be, and thus how can you conceivably sell it?!?

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