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As I was delivering a lecture on the topic of “Buying Local” a few weeks ago, I was struck by something I had not thought about for years.

“Progressives” seem to be obsessed with the idea that government is an insurance company. Indeed, they call much of what they favor, “social insurance.” They view the legitimate role of the state to make sure that people are insulated from very bad outcomes. Thus, the call for retirement “security,” minimum incomes, health care, and the like. Believe it or not, I am sympathetic to some of this view, so long as the programs are consistent with the Rule of Law. But let me ask, if you view the proper role of government to be an “insurance agent” especially because we never get to go behind the veil to choose what kind of a world we wish to live in, then ought you not be consistent in applying this view as a legitimate role for government?

To wit, consider the implications of following through on the wishes of those who wish us to live a more “buy local” lifestyle. Imposing “localism” on any reasonable scale is asking us to willingly forego the greatest insurance policy ever “devised” – the system of global commerce.

How many folks even realize that wheat and grain prices doubled and tripled between 2006 and 2008? If they did, they may have noticed a pathetically apologetic sign at their bagel shop (like I saw in mine) apologizing with something like, “Sorry that our bagel prices have increased by a quarter, our flour costs have risen dramatically in the last 6 months.” But no one starved here, and our lifestyles were barely altered. A similar trebling of prices in a poorer country would mean utter devastation, just as the many times in history this happened. If you ask folks to live as locavores, then any blight, hail storm, pest invasion, heat wave, drought, fire, mold, etc. will utterly destroy entire towns. It is the very nature of global commerce, with a vast, inexpensive and strong communications and transportation sector, that insulates us from major shocks like this. If we endure a tripling of wheat prices today because of a blight in America, Russian wheat will soon find its way here. Indeed, speculators will ensure that it finds its way here even faster than normal and will spur additional output. Even if the new wheat were not forthcoming, a tripling of wheat prices would impose no real hardship in our world when less than 10% of the typical family’s budget is taken up by food expenditures (see the consumer expenditure survey), and only a small percentage of that consists of wheat products. That achievement (food taking up so little of our budget) is very definitely attributable to the massive global division of labor and attendant exchange that comes along with is.

Thus, pushing us closer to a buy local lifestyle will tremendously increase the risk we are exposed to, and no doubt that this risk is greatest for the lowest income families among us. Does this not sound like exactly the opposite of the reason we have social security, unemployment insurance and the like?

Indeed, you cannot logically hold both views. Either you are a fan of “buying local” AND do not see a need for government to promote social insurance OR you are not a fan of “buying local” AND you support government safety net programs. In fact, if you believe that governments ought to increase the amount of insurance its people have access to, then you would get much more bang for the buck by demanding an immediate elimination of all tariffs and import restraints, and by demanding an immediate opening of trade relationships with anyone who wishes to peacefully engage us. However, I am willing to bet a nice dinner out, that it is rare to find anyone who holds the views that consistency demands.

4 Responses to “Either You Favor Social Insurance or You Don’t”

  1. david s says:

    Given that “localism” is primarily an advertising scheme that is intended to benefit small, independent farmers who tend to focus on seasonal specialties I don’t see much threat to the global market system. Proponents of “localism” can get carried away by claiming that the tomatoes bought at the farmer’s market will help stave off global warming or make people healthier. The recent expansion of farmstands in urban communities like Boston seems to be an unequivocal market success–aided and abetted by some incentives from local government. If a global commerce system implies a diverse range of suppliers then local agriculture tends to increase diversity and limit risk. If a command structure, a la Chairman Mao, starts passing decrees that we have to spend X dollars a week on local produce, then things will turn sour. I’m not too worried about that–Midwestern farmers are a potent lobbying force and wouldn’t tolerate any radical changes to the holy writ that is the Farm Bill.

    When has a government ever pursued consistent policies, particularly when it comes to agriculture? We still subsidize tobacco farmers while at the same time investing in smoking cessation programs funded by punitive (and usually regressive) taxes on the product.

  2. Harry says:

    Next post, I’ll try to respond to Wintercow’s challenge for the free dinner.

    But today I rode in a combine with a friend harvesting soybeans, and during our short conversation I commented sarcastically about some local operators who had not gotten all their corn harvested because of laziness born of general progressive malaise.

    “That’s because of the insurance,” responded my friend. He explained that the three rows left in the field were for the insurance adjustor to see. Federal crop insurance.

    I guess I am just naive about some things I should know about had I rubbed elbows more often with our county agent. I just never had the time for or any interest in farming the government.

    But there it is — socialist insurance for farmers who might get bad weather, or who maybe do not get themselves out of bed early enough to get the corn planted until the third week in May. Is this not a great world, or what?

  3. Harry says:

    Still not sure whether I get a free dinner from Rizzo….

    Am I inconsistent if I think free trade is good and welfare for farmers is bad? How about abolishing the Department of Agriculture?

    The very idea would shock my brethren at the Farm Bureau and the Holstein Association, who are now second-, third-, and fourth-generation subjects to federal milk marketing orders, deficiency payments, and a labarynth of subsidies, regulations, and government advice. And for some, big-time cheap money.

    The Agricultural Stabilization and Conservation Service was created back in the Depression as a response to a collapse in commodities prices, which was caused by government.

    Not everything the ASCS has done is bad, nor have the state departments of agriculture been all bad, either. They encouraged soil testing and erosion control, for example, for farmers who they figured, perhaps in some cases correctly, were too stupid to figure these

    To an economist, such programs helped less competent and more weakly capitalized farmers compete with their better capitalized and smarter brethren. To put it in concrete terms, the government has made it easy to borrow a ton of money to buy a $150,000 combine, rent some land, buy another $30,000 of seed and fertilizer, and plant. And here’s the catch: if you get bad weather, or even if you do not get around to it in time, there’s always crop insurance to help the poor undercapitalized farmer.

    This is the same system Fannie Mae and Freddie Mac use. Undercapitalized home buyers get a loan for a house which, like the combine, is way beyond expensive. With no equity they hope somehow they will be able to pay enough to the bank to keep the bank off their back until the next deal, and if they go under water, no problemo, they walk away and still get to keep their Prius. This is supposed to be good.

    Though it may be politically incorrect to say, screw the stupid undercapitalized farmers and homebuyers.

    This has nothing to do with helping the crippled, or anybody else who cannot care for themselves.

  4. […] are many reasons why people support the idea of “buying local.” (See here and here for a little more information). But the most prominent among these ideas is that buying local is […]

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