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Farmers for economic freedom

Updates from the Prairie Centre/Centre for Prairie Agriculture in Regina, Saskatchewan.

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web posted July 23, 2001

Poverty and wealth creation

Despite tremendous advances in agriculture and industry, poverty persists. Why? Why are some nations afflicted with poverty? Why do others enjoy high standards of living? What makes possible decent, even comfortable, conditions?

One popular claim is that poverty exists because of over-population. It is said that countries with large populations, such as India, Bangladesh, and the People’s Republic of China, suffer from poverty because production cannot possibly be great enough to feed, clothe and house adequately the millions of people.

This explanation has shortcomings. It ignores the necessity for considering the size of the population in relation to the area of a country. For every country of high population density that is impoverished, such as Bangladesh, relatively populous and prosperous ones such as Japan, South Korea, Taiwan, the Netherlands, Singapore and Belgium may be cited.

Another familiar argument is that the poor are lazy people with low levels of intelligence and few natural talents. This line of reasoning often takes on strong racial overtones. It also seems to be inconsistent with a number of basic facts. We have the examples of millions of supposedly inferior people who left countries, became prosperous and made tremendous scientific, cultural and material contributions in their adopted nations.

Another reason people are poor, some analysts contend, is that certain countries are not endowed with the necessary type or the proper quantity of natural resources. It is difficult to sustain this assertion, considering the fact that many of the most resource-rich countries are poverty-stricken, while many wealthy nations are less well-endowed with resources.

Then there is the explanation that prosperity causes poverty. As contradictory as this may seem on the surface, it is perhaps the most prevalent explanation. The creation and accumulation of wealth by some individuals causes others to be poor, so runs the theory. Poverty is the consequence of an unequal distribution of income; the prosperity of some comes at the expense of others.

But this too, is a myth. In open, competitive economic systems, wealth and an unequal distribution of income do not cause poverty. The prosperity of some does not cause others to be poor.

In a market economy, there is no other means of acquiring and preserving wealth, than by supplying the masses in the best and cheapest way with the goods they ask for. This market process is the source of new wealth. It does not redistribute wealth to the powerful at the expense of others, such as in a collectivized economy; rather, it enables new goods and services to come into the marketplace.

Contrary to popular sentiment, high incomes and high profits are key elements of the process which generates our prosperity. High incomes and profits are the reward a person receives for serving his fellow men. More specifically, profits are the reward for reducing costs and using scarce resources most efficiently in the competition to satisfy consumer desires.

By rewarding with profits those who successfully satisfy consumer demand, the market maximizes the incentives to create goods and services. By permitting the accumulation of wealth, it also maximizes the amount of capital available to produce more. Profits direct this capital to where it is most vitally needed in order to meet consumer demand.

Poverty will never be eradicated. But the way to lessen poverty, is to create a favorable environment for investment and wealth creation.

Adapted from the article "What Causes Wealth?", by Roger Ream, former Director of Seminars of The Foundation for Economic Education.

web posted July 16, 2001

Understanding the global marketplace

By Craig Docksteader

As part of its defense in the U.S. International Trade Commission investigation, the Canadian Wheat Board recently submitted a report by two American economists. Entitled, "Anatomy of the Global Wheat Market, and the Role of the Canadian Wheat Board", the report provides a number of insights into how the CWB operates in the global marketplace. The following quotes are taken from the report:

The CWB markets wheat in a competitive, global marketplace
* "The global wheat market is comprised of numerous national and corporate competitors, supplying customers with both homegrown and internationally traded wheat."

Supply and demand determines the price of CWB wheat
* "General trends in wheat pricing throughout the world are driven overwhelmingly by changes in the global supply and demand balance of wheat."

The CWB has no control over supply and demand in the global market
* "Apart from the relative participation of wheat exporting countries in the global market, it is important to recognize that three of the major exporting nations -- Canada, Australia, and Argentina -- are not among the largest wheat producing countries by any means. In many years China, in addition to being the world’s largest producer of wheat, has also been its largest importing destination. The European Union is the second most significant producer, ranking a close second behind China. India ranks third and the United States fourth. Russia is also a major wheat producer, and if the former Soviet Union is consolidated as a single entity, it moves up to second or third place. The existence and behavior of non-exporting wheat producing countries cannot be ignored in assessing the conditions of competition in the global market..."

Multinational grain corporations do not control the price of grain
* "Wheat prices around the world are established through negotiated sales between commercial suppliers, including both private grain merchants and STEs [State Trading Enterprises such as the CWB], and buyers. Many times, such prices are linked to spot prices on grain exchanges, such as the MGE [Minneapolis Grain Exchange], simply because these organizations efficiently assimilate and reflect information bearing on market fundamentals such as crop production levels, weather, and so on."

The CWB must accept the market price
* "As in any essentially competitive market, as a general proposition, price trends are determined by the broad balance of supply and demand... Although prices may be negotiated individually, buyers have no reason to agree to pay more than the "market" price, and sellers have no reason to agree to accept less."
* "...the ability of any single marketing entity, such as the CWB, to exercise market power within an individual market is severely limited."

The CWB has no more ability to price discriminate than any other major grain marketer
* "Whatever price discrimination takes place in international markets by large exporting wheat merchants such as Cargill, the CWB or the Australian Wheat Board, is simply classic third-degree price discrimination, wherein sellers obtain prices above marginal costs by marking up sales to reflect the elasticity of demand they face."

The CWB cannot raise the price of grain beyond the market price.
* "If the CWB or Cargill attempt to increase the price of durum to mills in country A, thereby increasing the cost of semolina and pasta production within the country, customers simply import more semolina or pasta at world prices."

web posted July 9, 2001

Global warming: A significant threat or a bogeyman?

Global warming first captured public attention because of some very hot summers in the 1980s, especially one in 1988. On a hot day, James Hansen, who heads NASA’s Goddard Institute, told a Congressional Committee that he thought human actions were beginning to raise the world’s temperatures -- that global warming had arrived.

It is true that over the past 100 years the earth became slightly warmer. The Intergovernmental Panel on Climate Change, a group of climate specialists organized by the United Nations and the World Meteorological Organization to assess information about climate change, estimates that the increase was between three- and six-tenths of a degree Celsius, or one-half to 1 degree Fahrenheit. The interesting thing is that most of the warming occurred before most of the greenhouse gases, that some say cause global warming, were put into the atmosphere by human action.

The increase may reflect natural variations in temperature because temperatures have not been going up steadily. There was a significant decline between 1938 and 1970. That decline led scientists in the 1970s to worry about a coming Ice Age. In fact, Stephen Schneider, a scientist now predicting severe global warming, urged in 1976 that people consider "massive world wide actions" to hedge against the possibility of a new Ice Age.

When people talk about global warming they usually mean that temperatures will rise due to the "greenhouse effect." There is nothing sinister about the greenhouse effect. A number of gases, including water vapor, CO2, methane, and others, keep the earth warm by trapping infrared rays that would otherwise be lost in space.

Scientists who think the earth will get significantly warmer base their view on the fact that some greenhouse gases, especially carbon dioxide, are increasing in the atmosphere. Carbon dioxide is released when fossil fuels such as coal and oil are burned.

A problem in explaining the scenario is that the pattern of warming does not follow the rise in CO2. If CO2 and other greenhouse gases caused the earth to warm, temperatures should have risen roughly in tandem with the increase in greenhouse gases. That isn’t the case. They rose in the first half of the century, but flattened out between the 1930s and 1970s, only to rise again after that. And temperatures in the Arctic, which should be getting significantly warmer if global warming predictions are correct, have been going down. Over the past forty years, they declined by 1.5 degrees Celsius.

The irony is that some scientists say that if the world got warmer it wouldn’t be all that bad. Andrew Solow of the Woods Hole Oceanographic Institute notes that there "is some irony in the description of global warming as problematic since it is not unreasonable to view human history as a struggle to stay warm."

Another irony is that more carbon dioxide in the air will benefit many plants. It causes more luxuriant growth, larger flowers and greater crop yield. Some scientists think that rising CO2 levels in the air have contributed to the Green Revolution -- that is, the remarkable increase in food production of the past few decades.

Doomsday predictions of climate change are nothing new. In 1975, International Wildlife Magazine published a piece called "In the Grip of a New Ice Age". That same year Science Digest published "Brace Yourself for Another Ice Age." And Lowell Ponte published a piece that asked, "Are We headed for a New Ice Age?"

Indeed, in the early 1990s, after parts of the US experienced heavy snows and severe cold, a new interest in an Ice Age reemerged. In January of 1994, Time magazine even published a piece that was titled, "The Ice Age Cometh?"

- Excerpted from "Facts Not Fear" by Mike Sanera and Jane Shaw, published by Regnery. Slight grammatical editing has been conducted in order to ensure flow of text.

"Where Do We Go From Here?" is a feature service of the Prairie Centre. Previous commentaries can be viewed on the Prairie Centre’s website: www.prairiecentre.com

web posted July 2, 2001

Saskatchewan lagging in ag productivity

By Craig Docksteader

A recent publication released by the Saskatchewan Chamber of Commerce notes an interesting fact: When it comes to productivity in the ag sector, Saskatchewan takes last place.

Entitled, "Action Saskatchewan: A Blueprint for 2005", the study is the second in a series which aim to create an economic vision for Saskatchewan's second century. This year's release clearly documents that while Saskatchewan's ag industry has a lot of potential, little of it is being realized.

Based on farm gate receipts in 2000, the publication notes that Saskatchewan's farm income per acre was only $86. Alberta and Manitoba are both between $100 and $200 per acre, while the other provinces range from almost $300 to just about $700 per acre.

According to the Chamber, the difference in productivity exists primarily because Saskatchewan has focused on the production of low value, high volume commodities for export, and lags considerably in value-added initiatives. Although the province has 47 per cent of Canada's arable land base, it is home to only 2 per cent of the nation's food processing. In contrast, Alberta has half as much arable land as Saskatchewan, and yet does four times as much processing. Manitoba's arable land is one quarter of Saskatchewan's but it's food processing sector is twice as big.

When you look outside the prairie region, the disparity is even greater. Ontario has only 9 per cent of Canada's arable land and yet boasts 51 per cent of the nation's food processing. Quebec's arable land base is about one twentieth the size of the prairies, and yet its food processing sector is almost one and a half times larger. Clearly, the prairie ag industry is lagging behind the rest of the country in productivity, and Saskatchewan is trailing them all.

The Chamber's findings support what many prairie producers have been saying for years. Federal agriculture policy has subjected the prairies to different rules than the rest of the country which have stifled growth and development in the prairie ag industry. Ag policy promoted the export of raw grain at the expense of the domestic value-added industry for decades. Even now, marketing regulations on wheat and barley significantly diminish a producer's ability to partner with developers in the value-added sector. Provinces without the same restraints have seen their ag sectors zoom ahead of the prairies in productivity.

But while the ag sectors of all three prairie provinces were subject to the same federal policies which used the state to perform typically private economic functions, it was Saskatchewan that embraced these principles on a provincial level. In 1946 and 1947, reports prepared by the C.C.F. government's Economic Advisory and Planning Board stated their intention clearly:

"The purpose of comprehensive Socialist planning is to mobilize our communal resources, to raise the over-all standard of living and to ensure an equitable distribution of economic wealth and privilege. The C.C.F. believes that the achievement of such a purpose can only be effected by replacing the present Capitalist system with a Socialist form of society. In this context, Socialism carries its original and broadest definition as the use of the mechanism of the state, under the democratic control of the electorate, to perform most of the economic functions heretofore held in the hands of private owners of Capital."

In addition, the C.C.F. Economic Advisory and Planning Board decided the following about agriculture:

"The basis of economic life in Saskatchewan has been its capacity to produce wheat."

"...the production of food, principally wheat, will remain Saskatchewan's primary role in both the Canadian and world economy..."

"...there is a small place for industrial development, especially in the processing of primary resources such as wheat... ...such development can never be large..."

Saskatchewan's lagging ag sector is no mystery. It is simply the harvest of the beliefs, attitudes and policies which were sown more than half a century ago.

Craig Docksteader is Coordinator with the Prairie Centre/Centre for Prairie Agriculture, Inc.

Prairie Centre/Centre for Prairie Agriculture, Inc.
#205, 1055 Park Street
Regina, SK
S4N 5H4

Phone: 306-352-3828
Fax: 306-352-5833
Web site: http://www.prairiecentre.org
Email: prairie.centre@sk.sympatico.ca

The CFEN needs your help! The battle against the Canada Wheat Board can only continue with your support.

Canadian Farm Enterprise Network
Box 521
Central Butte, Saskatchewan
S0H 0T0

Write the following and demand free market rights for Western Canadian farmers!

The Canadian Wheat Board
423 Main Street
P.O. Box 816, Stn. M.
Winnipeg, MB
R3C 2P5

Telephone: (204) 983-0239 / 1-800-ASK-4-CWB
Fax: (204) 983-3841

Email Address: cwb@cwb.ca

Ralph Goodale
Minister Responsible for the Canada Wheat Board
Department of Natural Resources Canada
21 - 580 Booth Street
Ottawa, ON
K1A 0E4

Telephone: (613)996-2007
Fax Number: (613)996-4516
Email Address: rgoodale@NRCan.gc.ca

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