Wednesday, November 28, 2012

The sweet and savory taste of larceny: The politics and economics of corn

(Originally posted by Pat on 1/29/10)

The following is a paper I wrote for a class in Global Justice at the University of Michigan Residential College. (The paper received an A, in case you were wondering.) Unlike most college term papers, this one has significant policy implications for the US government and far-reaching consequences for the world economy. My parents think I should actually send it to the Obama Administration; I'm not so sure. I'm ambitious, but I'm not that ambitious! But at the very least I will publish it to the world, starting right here on this blog.

I'll bet you never thought corn was such an important issue.

Corn. A triumph of ancient genetic engineering, the Zea Mays plant has evolved from an inedible wild grain to a staple food around the world. Most of the world's corn is grown in the United States; today, US farms produce over 10 billion bushels (350 billion liters) of corn every year1. This is over 1000 liters per person per year—in essence, somewhere in the Midwest each of us has our very own cubic meter of corn. Where is all this corn going? Well, the average American consumes 17 kg of high-fructose corn syrup (HFCS) per year2, representing a total consumption of 5 billion kg of HFCS. It takes 2.3 liters of corn meal to make a kilogram of HFCS,3 so of that 350 billion liters of corn, about 12 billion is going into HFCS production. HFCS is only economical for producing sweeteners for two reasons, both due to government policy, not the market: First, the tariff-rate-quota on sugar imports4 doubles the price of sugar5; second, State and Federal subsidies on corn production in the amount of $10 billion per year6 (62% of which goes to commercial farms)7 keep the price of corn low and stable. This is roughly half of all US farm subsidies, which altogether total about $23 billion.8 Still, these 12 billion liters of corn only account for a fraction of what the US produces. What about the remaining 338 billion liters—is it being eaten? Yes... but not by humans.
Only 35 billion liters of corn are actually eaten by American humans each year.9 Another few billion is used in pet food. The remaining 300 billion liters goes into feeding livestock, primarily in concentrated animal feedlot operations (CAFO). Because it takes about 5 kilograms of grain to produce a kilogram of meat10, these same 300 billion liters of corn that currently feed enough animals to feed 300 million people could instead be used to feed as many as 1.5 billion if they were eaten directly. Admittedly most of this corn is of such low quality no human would want to eat it; but this is itself due to the fact that corn has been artificially commodified—it is because in the land of the free, all corn is created equal. Right now the USDA standards for what constitutes “corn” and can be sold as such are so low that pretty much anything that comes from the Zea mays plant can qualify, not just kernels but pieces of stem and leaves if they are small enough. Up to 10% can in fact be “other grains” such as wheat or rice, and for low-grade corn up to 7% can be unclassified “foreign material”. What qualifies as corn (even no. 2 grade corn, the stuff used for HFCS) is quite literally decided by scales and sieves.11 Compare this to the standards for fresh fruit and vegetables, which are based on such things as color, texture, and lack of impurities.12 Corn is not rated under these standards—except of course when it is sold as sweet corn and corn on the cob, which are eaten directly by humans and hence classified under the “fresh vegetables” standards.
Who benefits from this arrangement? Ordinary Americans, who get to eat meat whenever we want—but even more so, agribusiness corporations like Archer Daniels Midland (ADM), which made a net income of $1.14 billion last year,13 of which as much as 40% is attributable to tariffs and subsidies.14 By keeping sugar prices high and corn prices low, the US government is effectively using its military and economic power to institute a policy of “buy American” in food. Any thought that this might be based on the environmental benefits of local food must surely evaporate once we remind ourselves that most of this corn is being produced with toxic pesticides and synthetic fertilizers (while the nutrient-rich manure of cows and pigs is literally thrown away), and that livestock account for 18% of greenhouse emissions,15 more than transportation.16 Clearly the purpose of this policy is to make money for American farmers and agribusinesses. Why is it, we should ask, that the Republicans who complain about “wasteful spending” like $400,000 to renovate a bridge (#43) and $1 million for paleontological expeditions in Argentina (#54)17, each a one-time grant for Keynesian stimulus, aren't complaining about the $450 million for ADM shareholders taxpayers are forced to spend every year? The stock of animals in the United States is made up primarily of 100 million cattle, 60 million pigs18 and 9 billion chickens19; if we presume (admittedly unrealistically) that the $23 billion in annual subsidy money is split evenly between the three species, this means that each chicken receives $0.85 a year, each cow receives $76.67 a year, and each pig receives $127.78 a year. For comparison, the “$1.25-a-day” poverty level that 1.4 billion people suffer from20 is $450 a year—so what we pay (the owner of; we feed the animals but obviously we do not pay them21) four pigs, six cows, or 550 chickens would double the income of someone in the poorest 25% of people in the world. In fact, it would do much more than this, since farm subsidies are hard currency rather than purchasing power parity; it is typical for poor countries to have PPP ratios as high as 3:1, such that in fact someone in the poorest billion people in the world would see their income double if we supplemented their income with the same amount of money we currently subsidize to an American pig.
And besides the question of benefits, there is another question, one we ask all too rarely: Who is harmed? In the long run, we are all harmed by the environmental damage. Climate change will probably hurt the poor worse than the rich, but it will and must hurt everyone—environmental sustainability is inherently Pareto-optimal, but most of us are too irrational as individuals and too conservative as a society to see this. Worse, there is America's unprecedented and rising rates of obesity22, which is the number one cause of death in the First World23; because of childhood obesity life expectancy may in fact be decreasing in the US for the first time since the Great Depression24. This dire state of affairs can be attributed in part to pro-corn policies: High-meat diets (especially beef) increase the risk of heart disease relative to vegetarian diets,25 and scientific evidence is mounting that high-fructose corn syrup has particularly harmful effects on mammalian metabolism, even worse than those of equivalent amounts of sugar or fat.26 Everyone realizes that eating too many calories and getting too little exercise is bad for your health; but it is becoming increasingly clear that even calorie for calorie beef and HFCS are particularly unhealthy. We would be better off eating sugar. All of these considerations should motivate us even if we were the kind of sociopathic Homo oeconomicus who care nothing for the suffering of animals, the horror of poverty, or the injustice of exploitation.
Worst of all, the governmental policies that protect American corn and American livestock do so only at the expense of farmers outside the United States, especially farmers in poor countries. Subsidies and tariffs exacerbate already enormous inequalities between First World farmers and Third World farmers; the median annual income of a farmer in the US is over $50,00027, while the median income of a farmer in Africa is closer to $1,00028. The World Bank estimates that if the US and EU eliminated subsidies and tariffs for oilseeds (cotton, flax, soy, canola), the Third World share of oilseed production would rise from 50% today to 80% in a few years;29 this can only be the case if right now those subsidies and tariffs are forcing Third World farmers out of business.
Speaking of causes of death, malnutrition kills 6 million children every year.30 Over 1 billion people in the world are undernourished, nearly all of them in poor countries.31 How much of this hunger is attributable to First World farm subsidies? It's difficult to say. But people are only ever hungry because they are poor, and due to the cost of transportation, it's clearly more expensive for a poor child in Ghana to get food from Illinois than it would be for him to get it from Ghana. And right now, the farmers in Illinois have such enormous economic advantages that the farmers in Ghana can barely keep themselves from going out of business. Even under a true free trade policy there would still be enormous differences simply due to distributions of capital and technology—but the tariffs and subsidies can only be making matters worse.
While it would be politically difficult to remove the tariffs and even more difficult to remove the subsidies, the only foreseeable harm in doing so would be suffered by American farmers, some of whom would be forced to find new jobs. This is indeed a concern, but it's how the free market works—there are always winners and losers. I do think it is important for societies to have a safety net in place that provides for people who are unemployed, at least long enough for them to find new employment; and farmers displaced by the change would certainly deserve that as much as anyone. So, by all means, let's do that; but still it's wrong to prop up US farmers at the expense of farmers around the world. (Once again, it seems to be the self-described “populist” Right who disagrees, while we “elitists” on the Left think the rich have a duty to provide for the basic needs of the poor. One would think “latte-sipping” would be an insult leveled by someone of Peter Singer's persuasion who thinks that charity is a duty and luxuries like lattes are moral crimes, but on the contrary it is leveled by people like Glenn Beck, who makes $32 million a year,32 Sarah Palin, who spent $150,000 on clothing during the 2008 campaign,33 and Michael Steele, who recently was exposed for spending $2000 at a strip club.34 It's not hard to see why these same people entreat us to be suspicious of science and math.) Obviously people have a right to food and a right to shelter, and it could be argued that they have a right to work; but a right to farm? Indeed, a right to make money as a farmer, a right we specifically grant to Americans but not to anyone else in the world? What kind of right is that?
It could be argued that this is too idealistic, that the reality of the political situation prevents us from making any serious agriculture policy reform. Suppose Obama tried to push such a bill through Congress. First, who would vote for it? Second, even if it passed, wouldn't that essentially guarantee Obama's loss in Midwest swing-states like Michigan, Ohio, Indiana, Iowa, and Illinois—and hence his loss in the nation as a whole? (Another problem with the US system: Why are there swing states at all? Why are some votes worth more than others?) If the policy were framed as simply “cut farm subsidies” or even “enhance free trade”, this is no doubt the case. But one of Obama's central assets is his skill and eloquence as an orator; what if he entreated us to consider not only the (largely fictional) “plight” of American farmers, but the evil exploitation of agribusinesses and the horror of global poverty? What if he framed the policy as not “cutting farm subsidies”, but “reducing world hunger” or “giving men and women around the world a fair chance at making a fair living”? What if he turned the populist rhetoric against itself and pointed out that the people using this rhetoric are the same people flying around in corporate jets and kissing up to coal and oil executives? What if he talked about the environmental, health, and economic benefits for all Americans? What if he pledged to grant full unemployment benefits and job-training programs to any farmer displaced by the policy? Given that we live in a nation where mindless rhetoric rules, 40% of people are Creationists35, and the Tea Party is taken as a serious political force, it's difficult to say whether this would, in fact, work. But even 10 years ago, what could have seemed more politically impossible than a biracial President and universal health care in the United States?
1Corn Refiners Association, By the way, is corn really "refined", like coal or iron? Silly me, I thought it was grown.
2USDA Economic Research Service,
3Gray, F. (1991). "Trends in U.S. production and use of glucose syrup and dextrose, 1965-1990, and prospects for the future" - U.S. Dept. of Agriculture, Economic Research Service report, Situation and Outlook Report: Sugar and Sweetener.
4USDA Foreign Agricultural Service,
9Credit and Finance Risk Analysis,
10Worldwatch Institute,
11USDA Grain Inspection, Packers & Stockyards Administration,
12USDA Agricultural Marketing Service,
18USDA National Agricultural Statistics Service,
21I am struck by a macabre analogy here: The money we “pay” to a cow is rather like the 3/5 “vote” that slaves used to receive under the US Constitution. In fact the “vote” benefited the slave's owner, not the slave; and similarly the subsidy benefits the cow's owner, not the cow. Obviously factory farming is nowhere near as bad as slavery, and it would be insanity to claim otherwise. But nonetheless the analogy remains: based on how many beings you own, we subsidize you in profiting from their suffering. And of course what right has anyone ever had to own a sentient being?
25Sinha, R., et. al. (2009). "Meat Intake and Mortality". Archives of Internal Medicine 169(6): 562-571.

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