How to Slap Big Ag Apologists in the Face with Economic Truth

Among the most common arguments expressed by proponents of industrial agriculture is that sustainable food production is too expensive.  “Tasty produce and healthy animals and clean water and vibrant rural communities are great,” declare Big Ag’s PR spinsters, “but sustainable farming isn’t economically viable; if we want affordable food, we need industrial ag.”

This argument, of course, is severely flawed, and anyone who uses it has either a fundamental misunderstanding of economics or a misguided conception of the impacts of industrial agricultural practices.  Or they're just using a specious economic argument to promote their own pro-industrial interests, assuming that most people don’t know enough about economics (or industrial agriculture) to be able to call BS.

Fortunately for those of us who value things like facts and logic and truth, the Industrial-Is-Cheaper mantra can be easily rebutted by anyone who’s familiar with a few basic economic principles.  And seriously, I'm not referring to esoteric theories that you'd need a PhD to wrap your head around – I'm talking about the sort of concepts you learn in the first week of a high school econ class.  Need a refresher?  Here’s the one-sentence summary: industrial agriculture can produce cheaper foods (at artificially low prices) because the industry enjoys financial support from taxpayers and because producers don’t have to pay for the costs of the damages they create.

Here’s the one-sentence summary: industrial agriculture can produce cheaper foods (at artificially low prices) because the industry enjoys financial support from taxpayers and because producers don’t have to pay for the costs of the damages they create.

Or, if you'd prefer to bust out the fancypants economics jargon, agribusiness receives substantial direct and indirect subsidies, and is able to impose on society the cost of significant negative externalities generated during production, enabling it to sell industrial foods well below the true cost of production.

All of this is to say, Big Ag’s cheap food is actually pretty expensive.  Here are the details:

Subsidies

This means straight-up financial support from the government; fat checks from the capital with love.  Note though, before you get too righteously indignant about the notion of government handouts, that there’s actually a reasonable economic justification for subsidies in certain circumstances; basically, they enable Uncle Sam to step in and help fund stuff that benefits society, but would otherwise be under-produced without external support (e.g., public education).

Unfortunately though, the stuff that’s ultimately subsidized by the US government isn’t always the stuff that benefits society most (or, in some cases, at all).  This is, in large part, because subsidies are controlled by politicians, who, it should not shock you to learn, have been known to make decisions based less on The Greater Social Good, and more on things like getting reelected, securing pork for their supporters, doing what lobbyists tell them and catering to the demands of big corporate donors.

In the US, huge subsidies are devoted to agriculture.  According to the fiscal gurus at the Environmental Working Group, between 1995 and 2010, the US government shelled out nearly $162 billion in agricultural subsidies.  However, the vast majority of this money is devoted not to farmers who grow the healthful fruits and vegetables recommended by the USDA, or farmers who incorporate sustainable practices in order to safeguard the environment and human health, but instead to producers of commodity crops (primarily corn, wheat, cotton and soy) who own huge industrial farms.

Ultimately, agricultural subsidies allow commodity crops from industrial farms to be sold for less than the cost of production, which in turn drives down the cost of inputs like corn sugar high fructose corn syrup for large-scale food processors, making highly processed junk food artificially cheap.

These are the sorts of operations that rely on monocropping and heavy use of synthetic fertilizers and pesticides, threatening water quality, soil quality, biodiversity and human health.  And they're not small players either – between 1995 and 2010, 74% of ag subsidies were collected by just 10% of the recipients.  (Learn more by perusing Environmental Working Group’s Farm Subsidy Database.)*

Ultimately, agricultural subsidies allow commodity crops from industrial farms to be sold for less than the cost of production, which in turn drives down the cost of inputs like corn sugar high fructose corn syrup for large-scale food processors, making highly processed junk food artificially cheap.  Subsidized commodity crops also prop up the industrial livestock sector, which relies on a steady stream of cheap grain to feed to animals.  Indeed, factory farms depend on this underpriced resource in order to remain economically viable.  And by the way, industrial livestock operations can also receive direct subsidies through the Environmental Quality Incentives Program (EQIP) to help manage the waste they generate (this would be sort of like cutting BP a check to help prevent future offshore oil spills instead of simply requiring the corporation to implement responsible practices on its own dime).

Big Ag also enjoys significant indirect subsidies. Most notable among these is the government funding of agricultural research at land grant universities, which, thanks to the tremendous influence of agribusiness, is devoted almost exclusively to the improvement of industrial production techniques. So instead of subsidizing research to develop more efficient methods of growing crops without pesticides for instance, we subsidize things like the totally insane (and totally privatized) genetically engineered salmon project.

*Note for the econ/policy geeks: under the 2012 Farm Bill, direct payments to farmers are expected to be eliminated, but a new crop insurance program (Agriculture Risk Coverage) will be created to ensure that federal support of commodity crop production continues – in other words, subsidization of industrial crops will still exist; it'll just be a little less direct.

Negative Externalities

This is a pretentious economic term that means “hidden costs” – i.e., costs created by the production of a good that aren’t paid by the producer or the consumer of the good.  So if you sell a product that generates negative externalities, its price will be artificially low because the cost of these negative externalities will be passed on to someone else.

If you sell a product that generates negative externalities (hidden costs), its price will be artificially low because the cost of these negative externalities will be passed on to someone else.

Industrial agriculture cranks out foods that have low sticker prices at the grocery store, but the production of these foods creates huge negative externalities.  As noted above, industrial crop production damages the environment (see nutrient pollution, pesticide pollution, soil erosion, biodiversity reduction, water consumption, fossil fuel consumption, etc.) and impairs human health (toxic pesticides are no good for anyone).  In many cases, it also relies on the gross exploitation of farmworkers.

Industrial livestock production creates even more egregious negative externalities; as a result of the high concentration of livestock – and corresponding concentration of waste – factory farms end up polluting water, air and soil with a host of contaminants, threatening the environment and human populations.  They also impair human health by fostering the development of antibiotic-resistant bacteria, increasing the risk of foodborne illness and facilitating the overconsumption of meat decried by public health professionals as a major contributing factor in the skyrocketing rates of chronic diseases such as obesity, diabetes and heart disease.  Factory farms also compromise animal welfare and have been shown to degrade the socioeconomic fabric of the communities in which they're located.

Sustainable agriculture, on the other hand, often generates positive externalities – these are “hidden benefits” of production that are enjoyed by people who don’t actually buy the good.  For instance, sustainable farms help preserve land, build vibrant communities and foster the growth of local and regional economies.  When you buy an organic tomato at the farmers' market, you help facilitate the provision of these social benefits – but the price of the tomato isn’t lowered to reflect this.  Instead, society gets the benefits of sustainable agriculture for free – while getting stuck with the tab for Big Ag’s messes.

Indeed, many of the adverse impacts of industrial agriculture have real costs that aren’t paid by producers, but are instead imposed on others – on the neighbors of factory farms, on slaughterhouse workers, on uninformed consumers and on society as a whole (particularly on the taxpayers who finance subsidies and pay for the damages).  And while it’s difficult to measure some of these costs precisely (e.g., the total cost of the dead zone created by agricultural runoff in the Gulf of Mexico), it’s irresponsible to ignore them by claiming that the price of an industrial food accurately represents its true cost.  Suddenly that farmers' market tomato grown sustainably without synthetic pesticides and fertilizers or big government subsidies doesn’t seem so expensive.

Responses to "How to Slap Big Ag Apologists in the Face with Economic Truth"

  1. David Zetland

    Excellent post! I’ll link to it. Don’t forget the other types of indirect subsidies via regulations, tariffs, and other barriers to competition and good business that benefit big ag I call them opportunity cost subsidies and they are HUGE when you consider the value of water rights used by aggies...

  2. Diane Noland

    All these things are well known at least by some of us and must be known by at least some of our Congress critters. Since the situation with our health obesity, diabetes, heart disease and cancer rates through the roof, health care costs, and environmental degradation threatening our water supplies, wells, etc., why isn’t something being done about this? Common sense never seems to enter the legislation in our government. We are killing ourselves and even the people involved in Big Ag are among the victims. You know how they say cats never mess in their own beds? Well, people sure do.

  3. Darris

    Here is a shiny example of Big Ag’s hold over the USDA ~ http://vegnews.com/articles/page.do?pageId=4761&catId=8&fb_comment_id=fbc_10151025437269279_24016921_10151026836484279#f24fe29efbbd318 Let’s not be so naive to think that the FDA and the USDA has the general public’s best interests at heart. Thank you for enlightening us about the real costs of Big Ag Business Chris.

  4. Name

    Here is a shiny example of Big Ag's hold over the USDA ~ http://vegnews.com/articles/page.do?pageId=4761&catId=8&fb_comment_id=fbc_10151025437269279_24016921_10151026836484279#f24fe29efbbd318 Let's not be so naive to think that the FDA and the USDA has the general public's best interests at heart. Thank you for enlightening us about the real costs of Big Ag Business Chris.

  5. David Lackey

    This is an excellent article on the real costs of big Ag Business. I would like to add that the value of a diverse, sustainable diet less process and packaged food promotes good health, which reduces the cost of health care, which, in turn, is a formula I would like to see you present to the health care and health insurance industry.

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