Re: Communism vs Capitalism

Date: Sat Feb 24 2001 - 13:31:45 MST

Charlie Stross, <>, writes:
> We're seeing at least one example, today, of an entire industry being
> driven to the brink by improvements in its own efficiency and competition
> on price. Agriculture!

It doesn't really make sense economically for an entire industry to drive
its prices so low that no one can make money. I think the real reason is
what you mention later:

> We've got
> the most intensive, industrialised agricultural system in the EU, but it's
> competing with third world banana economies -- it can't bring in enough
> money to operate effectively.

So what you are seeing is not that the UK agricultural industry is somehow
competing itself out of business; it's that it can't compete with the
low labor and raw material costs of some of the third world countries.

When this happens, it is usually a signal that it would be better for
the UK to devote more resources into those industries where it has an
edge, such as modern, capital-intensive industries which benefit from
an educated work force. It can export those products and import food
and other products that are more efficiently produced elsewhere.

Granted, the resulting dislocations and unemployment can cause pain to
the farmers who lose their jobs and livelihoods and may have difficulty
being trained for other work. It may be appropriate to use unemployment
insurance and other policies to cushion the transition. But in the long
run, people will benefit if they specialize in things at which they have
a comparative advantage.

> If we posit a world in which regional economic imbalances have flattened
> out, we'll eventually hit a point where downward pressure on food prices
> can't go any further because if it does there'll be insufficient money to
> pay for food production -- but consumption os flat. If food is produced
> at cost, in sufficient quantity and quality for everyone, there is *no*
> further room for growth (other than through artificially-induced fashions
> and fads, which offer transient relief through manufactured scarcity).
> What happens then?

Food prices should stabilize at slightly above costs.


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