21 July 2009

Does government intervention lead to too much monoculture?

'Too much' in the sense that a properly functioning policy, with undistorted competition, would lead to more diversity and less vulnerability to drastic downturns. I suspect the answer is 'yes'. Take agriculture. Government has a long history of intervention in agriculture in the industrial countries. Perverse subsidies to the sector in the rich countries have contributed to the devastation of the physical environment, diverted wealth from the poor to the rich and accelerated the massive overcapitalization of farms and rural depopulation.

And in much of the countryside in the west, the visual testament to a long history of government involvement is square kilometre after monotonous square kilometre of land devoid of trees, hedges and human beings, devoted to intensive production of crops or pasture. Subsidies have exaggerated this specialisation, partly because guaranteed prices have reduced the risks of on-farm specialisation and partly because capital assets receive favourable tax treatment. So one result of the combination of subsidies and centralised price-fixing and subsidies has been a greater degree of monoculture in agriculture than would otherwise prevail. As well, without the high levels of subsidy it’s unlikely that farms would be as land-intensive as they are today. Net production would be lower, but so too would use of fossil fuels, pesticides and prices to consumers.

Government involvement in infrastructure has similarly increased our dependence on fossil fuels. Government has implicitly guaranteed oil supplies. It's done it on our behalf and as a result the construction industry has, as in agriculture, entrenched and exaggerated our dependence on oil.

The construction industry: not necessarily a part of government but certainly remarkably close to it. Perhaps my header would read more accurately if I inserted the words "on behalf of its corporate friends" after "intervention". And rephrased it as a statement, rather than a question.

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