How the world changes

A useful little example of the incredible inefficiency of Soviet farming.

In the 19th century Russia and Ukraine were the bread basket of Europe, but production dropped under Josef Stalin’s forced collectivisation policy and by the end of the Cold War the Soviet bloc had become a net wheat importer.

Now thanks to rising world food prices and a new law allowing foreigners to own land, Russia is once again exporting. With the proximity of Black Sea ports to wheat-deficient Africa, Asia and the Middle East, Russian wheat has a competitive edge.

Private property, eh?

9 comments on “How the world changes

  1. I read that if the Russian Steppes could be farmed as efficiently as the US prairies then world grain production would increase by a 1/3. It looks as if Malthusians will be wrong again.

  2. Tim: Well I guess that even if foreigners are not allowed to own land, at least russian citizens now are – the argument of private property is thus still valid.

  3. Russia is planning to set up a state agency to control all grain exports. All the farmers will have to sell to the state agency which will then organise exports.

  4. Of course laissez-faire capitalism was so efficient that, when there were nautural disasters in India there were shortages of rice, so the price went up ,making the export of rice out of the stricken areas even more profitable.
    Private real estate development has worked wonders for the American economy as well.

  5. DBC Reed:

    When there’s a shortage (no matter of what) and no matter the particular cause, what would you expect the price of the good to do?

    Everything that has a price has whatever price it has as a result of its relative shortage Nobody pays any price at all for goods (or services) for which there’s no shortage. The greater the shortage and the more acutely felt by the valuing individuals, the more greatly will the price be enhanced. It’s not the sellers but the consumers that determine the price.

    In the case that you mention, a more accurate description of what’s going on would be to say that, under normal conditions, the people of the rice-growing areas of India were able to afford rice locally grown, some of which was obviously exported under normal conditions (the shortage due to disaster being understood as having reduced the quantity exported and, thus, causing a rise in the price in places normally receiving the exports.

    Your complaint largely amounts to saying that, because some people in other places are better off and can afford to increase their expenditure for rice, their specific advantage, whatever it may be, “unfairly” causes the people in the rice-growing area to suffer. Nothing could be further from the truth of the matter! Would it, somehow, be “fairer,” if, simultaneously, the people in the place exported to had suffered some economic conditions which made them poorer and unable to “bid up” the price of the rice? In that case, those people might face some degree of starvation themselves in addition to the situation in the growing area, where prices would have still increased (due to destruction of part of the crop), though not as much–though now, the quantity might be adequate to see most through the worst of conditions.

    But–guess what? The reduced exports are (in all likelihood) a substantial portion of what the farmers themselves normally counted on to provide the werewithal for a continuation of operations. With that source of income gone, many farms would fail, particularly in getting in the next crop (everybody eats during the emergency but many starve later when, not only the farms fail; for lack of capital but the failed farms no longer can hire and pay any of the labor they used formerly.

    The situation you describe isn’t new. And, either is one of the oldest solutions: export all the rice possible and import cheaper food. And, in such case, they’re in luck: rice is virtually the most expensive–everywhere–of the major grain crops, particularly because of the labor-intensity of its cultivation. People (and particularly those in the rice regions) much prefer rice to other grains but often cannot afford to indulge their preferences–and certainly not in cases of emergency, Here, the very fact of the increased profitability of exporting the rice assure there will be adequate income for the importation of plenty of the less-desirable substitute.

    This is routine stuff. Are the auto workers in the Cadillac plant enttitled to drive Cadillacs while those in the Chevy shops must drive Chevvies? Is it actually “only fair” that seamstresses doing “designer-label” clothing must be paid enough to wear the expensive stuff they’re making?

    The plain fact is that there is not now (nor has hardly ever been) such a thing as a “free market,” despite the fact that the freer the market, the greater the ability to maximize the satisfaction of all participants, even in times of shortage and disaster.

    And your raising the matter of conditions in real-estate simply underscore your lack of familiarity with markets and, indeed, economics. Hardly any market existing anywhere (except those actually nationalized by governments) has suffered from more–and more different kinds–of government interference with market function than has real estate, particularly of the housing variety.
    But if you can’t understand rice, you’ll need quite a bit of “getting up to speed” before you can even begin to comprehend how distorted real estate matters have become (and this applies almost no matter where you happen to live).

  6. I am grateful for gene berman taking the trouble to write at such great length in defence of the hidden hand of market economics. However despite it being impossible in theory (at the time the laissez faire theories had virtually nothing to interfere with their smooth operation in the British Empire) between 12 and 29million Indians died of starvation through one El Nino event. The facts can be found in Mike Davies’ Late Victorian Holocausts 2001 and are usefully summarised by George Monbiot so that Mike Davies Late Victorian Holocausts George Monbiot should do the trick on Google.
    At the risk of receiving more patronising commentary,I would point out that,if you can find the New York Times for 30.ix.99 ,you will come across an article entitled Fannie mae eases credit to aid mortgage lending which points at Clinton wanting to help poorer people with buying houses (doubtless they don’t vote Republican). It goes on”In addition banks,thrift institutions and mortgage lenders have been pressing Fannie mae tohelp them make more loans to so-called sub-prime borrowers.” So it looks like corporate interests bear a considerable part of the responsibility for the sub-prime fiasco.

  7. DBC Reed:

    I do sincerely apologize for my patronizing attitude–it was unnecessary, besides being ill-bred. And, you’ve thrown into relief just where the system inadequacy lay in the case of the Indian famine. What had been overlooked–almost criminal negligence, I’d say–was the necessity of legislation aimed against El Nino behaving in such fashion.

    But I’m at a bit of a loss in the financial fiasco associated with the housing market. The entire industry, top to bottom, and on either “business”
    or “regulatory” side hasn’t anyone remotely associated who could be called a free-marketeer by any stretch of imagination. It’s one big mess of specially-priveleged (and regulated) entities
    in bed with their presumptive overseers. It’s just exactly what any free-marketeer could have confidently predicted as the likeliest of outcomes (and did–you could find Ron Paul’s speech in Congress of April, 2002, directed specifically to the matter and offering a bill intended to partially correct and defuse).

    It’s a common enough mistake to conflate businessmen in general with those opposed to Republicans, and even free-marketeers. But the most perfunctory review of campaign contributions might suggest another viewpoint as more accurate. Candidates of both parties receive contributions from various profit-making entities which could, with some justice, be viewed as “payoff” or bribe in disguise. But the facts are almost the reverse of those you’d
    probably suggest (and expect). Average contributions to Republicans are usually much smaller than to Democrats. A stark example was provided in the first Bush campaign, where Bush achieved an all-time (at that time) high in total received from an average contribution of about $70. Gore received a good bit less (but still a huge pile of money!) with an average contribution somewhat north of $20,000. Actual corporate contributions are (and have been historically) similarly skewed toward the the Democrats and nowhere more one-sidedly than in the major media. We’re not talking reporters and other journalist staff (about 90% or better of whom are registered Democrats)—we’re talkin’ “corporate.” The figures show ALL heavily favoring the Democrats, each with percentage figures exceeding 90% to the Ds and one, at least, at 100%.

    But I want to leave you with a “warm and fuzzy”
    feeling.

    I might also remind you, as just a little reflection
    on your part will prove to you, that the freer the market, the lesser the opportunity for priveleged treatment: no point in “paying off” when there’s no regulatory apparatus to be jimmied. In that wise, the behavior of Bill Gates’ Microsoft should be cautionary. Up to being busted on anti-trust charges in a celebrated trial, the outfit (nor Gates himself) hadn’t made any political contributions nor spent a single penny on the hiring of lobbyists. They taught him manners, alright–he’s fallen in line in both respects (and the contributions have been largely to Ds).

    But I want to leave you with a “warm and fuzzy” feeling, DBC. You’re right about me. I’m hardly concerned at all about all those dead in Inja’s sunny clime. Or the Holocaust. Or the starving, malaria and AIDS-wracked in darkest Africa.
    Because my observation of the world–not an economic theory–is that people get what they deserve. Note that I didn’t say that the people “getting” are necessarily the ones deserving–it’s just an “averaged-out” sort of thing and ain’t gonna change.

    The political dichotomy consists precisely in a juxtaposition of two fundamentaly opposing (but overlapping) views of human nature at least as old as any recorded history.

    On the one side are those who insist that “I am my brother’s keeper” (expanded to “we are our brothers’ keepers); these people are all those of the Left, recently, at least in the US characterized as “liberal” or socialist and those of the Right or “conservative,” the sum of whom constitute an overwhelming majority intent (depending on whether one or the other) controlling somewhat different aspects of their brothers’ affairs. But the sentiment expressed
    is not exactly straightforward: the intention is not to protect some from “others” among whom one counts one’s self ; it’s the exact reverse: to protect one’s self by cooperating in the restriction on all. And whatever the intent, the scheme “works” to a significant degree in the case of certain activities widely and historically recognized as “criminal.”

    But, with the exception of certain criminal actions which actually require as certain and prompt suppression as practical to forestall their repetition, the same overwhelming majority gradually begins to comprehend that many of those who do not agree that they are “their brother’s keeper” yet do not act as though they are unfavorably disposed toward their brothers. They do not lie, cheat, nor steal–even when they are under little threat of either detection or punishment; they (and this is true to varying degrees in many different sorts of societies widely dispersed across the globe) operate, approximately, according to the “Golden Rule” (not “do unto others as they do unto you” but, taking the initiative “do unto others as you would they shall do unto you”).
    Some undoubtedly lose out–but then so also do many under the other regime. The question is not only “which is better for me?” but also “which is better for all?” because, in saying “The State is a fictitious entity by means of which each man expects to live at the expense of his neighbor,” Bastiat was quite aware that he was not teaching people anything other than what they already knew and recognized as the truth.

    My lack of concern with the Indians or Africans is a practical matter: there are far more important matters involving larger quantities of well-being than those, some of whom are certainly doomed in any case on occasions of uncertain and unpredictable natural calamity.

    My concern (because I’m a head-in-the-clouds “theorist”) is with the looming crisis that I see forming on a horizon most likely beyond my lifetime but, quite possibly, not beyond the lifetime of some now living (and among whom are my children and grandchildren). It’s not a natural but man-made crisis and is, as thing now stand, absolutely inevitable. And I do not speak of “global warming” (which, even if true–which I do not believe–is in large part manageable by specific-measure reactions at appropriate times in the future).

    The crisis of which I speak is that to be expected from world-wide monetary collapse. Such an event can easily paralyze most of the productive efforts of most of Earth’s population with resulting, sudden privation on an almost unimaginable scale. Under such scenario, not many more than 10-20% of the current population could possibly survive the immediate disruption in the production and distribution of food and fuel. And the survivors would be rarest in those places now considered the most advanced and prosperous. Survivors would tend to be low-level agrarians so geographically isolated as to be not worth the attention of the certain resort to predation.

    Though originally I hadn’t meant to make the connection, the present financial crisis, as well as previous ones, are part and parcel of an underlying monetary malaise arising from the very idea that compulsion has any beneficial role to play in the social cooperation of men in production and distribution by means of indirect (money-assisted) exchange. The very best proposals for reform are mere “patches” on an ever-expanding balloon. The only certain effect is that the better the “patch,” the longer will be the interim before the next crisis but the larger the dislocation to be endured in that next. At some point will occur the one to which I refer (and the virtual collapse of what we call civilization). “Ancient civilization” (Rome )suffered a very similar scenario of a much
    simpler and less-widespread sort. Modern civilization, being much better and highly integrated and interdependent, willnot be so fortunate (nor so quick in recovering).

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