What a breath of fresh air to have a writer who challenges the current philosophies so eloquently.
Agricultural industry has been struggling for some time to articulate the institutionalised problems it is facing only to be dismissed as a whinging rabble who are acting in their own self interest.
Government would rather listen to a handful of very comfortable armchair experts with secure jobs than the people on the ground who often struggle to express their frustration.
Some of us have been saying for some time now that food security (and profitability) is an issue but the bodies charged with producing the statistics on the industry look only at production and declare unreservedly that all is well.
Ben Rees you have come up with some of the other measures that need to be looked at but I fear that the voices of reason are too few.
Even our new Minister for Agriculture is up against a hostile press and the free marketeers in Government and the Public Service who do not understand that we have over-reached the initial efficiencies created by a free market and are now in decline for all of the above reasons and some more as well.
Please continue to shed light on the issue.

I totally agree with Ben Rees comments on the failed economic philosophy as practised by successive Australian governments since Hawke/Keating, as it relates to Australian agriculture.
Each government since the Hawke Keating era has been influenced by the 'free trade zealots' and has lost sight that profitability, not scale lead to succesful enterprises, growth in production and therefore become sustainable in the long term.

The neoclassical economic theory in vogue for the past few decades fails to properly account for the distortions in the market caused by the concentration of market power in ever dimishing number of corporations and economies.

We have been sold the myth of the 'level playing field' espoused by the fanatical world traders. It simply does not exist and is exemplified by the decline in agricultural output/profitablity as shown by Mr. Rees table. This myth has been blindly accepted together with the equally mythical proposal that; big agriculture is more efficient and therefore profitable that smaller the agricultural units, the family farm.

Time and again we have seen major aggregations into huge production units, in all sectors of agriculture, fail due to huge debt burdens, high overheads, lack of dedicated management and many other constraints not generally found in the smaller family run efficient farms. So long as they don't gear up too highly.

Good on you Ben Rees. Keep it up!

The author has obviously failed to understand, or even to read, the Austrian school’s critique of both neo-classical and Keynesian theories, which completely invalidates his argument numerous times over, for the following reasons.

“…neoclassical rural policy has failed to deliver a profitable farm sector for over three decades”

Contradiction in terms. How can you blame free market theory for the failure of government interventions intended to deliver profits to a politically favoured sub-group of the population? That’s socialism that’s failed and which you should be blaming, not free markets. Complete refutation number 1.

If the lack of profitability is the result of government interventions, then it’s just mere economic ignorance to blame that on free markets. Furthermore, obviously there are extensive and intensive government interventions in all farm sector markets. It is simply factually incorrect to allege that these are “free markets”. The author fails to consider the extent to which the lack of profitability is because of interventions by government: complete refutation 2.

Even if the lack of profitability were the result of free markets, that would not necessarily show that there is something wrong with free markets, because the purpose of everyone in the world is not necessarily to deliver profits to Australian farmers. The only way you could conclude the lack of Australian farm profitability is the fault of free markets, is if you knew better than all the people in the world, what wants they are trying to satisfy by their actions in buying and selling. Needless to say, that is a false pretension of knowledge that Ben does not have, and is not capable of having. Complete refutation 3.

“The evidence is indisputable.”

The statistical methodology you have provided only proves, at best, correlation. But that's not good enough. To be logical, you need to prove causation. Your *assumption* that you have demonstrated causation, or anything significant, would only be valid if all the other factors in the world remained constant. Needless to say, they don’t. It is not okay for you to make an argument *as if* logic doesn’t matter.

(cont.)

That illogical assumption in Ben's methodology invalidates his entire argument. Complete refutation 4.

“Banks chasing market share ignored a long standing financial fundamental: capacity to repay debt form income.”

Notice how Ben takes no account of governmental manipulation of the money supply, in particular the Keynesian policy of chronically multiplying money substitutes increasingly out of proportion to money in specie on deposit? This is a fatal flaw because it’s not okay to just baldly assume that monetary policy has no relevant effect on banking practices or risk assessment. (Ben in effect assumes that only good comes from government interventions, and any undesirable outcomes must be down to (non-existent) free markets.)

“The change in output can be just as easily cash negative as it can be cash positive.”

This seems to be a non sequitur. Cash is also a different concept from productivity and profitability.

“This discussion has shown that assumptions underwriting contemporary orthodox economics are defective relative to the real world.”

No it doesn’t (although it’s true that they are defective). It shows that government failed in its stated purpose in interfering in an attempt to cause one favoured group to get higher profits. At no time has the author attempted to justify such interference for such aims. Nor has he considered whether the downside to farmers was outweighed by a greater benefit to the rest of society.

There is no need to resolve the issue of Say’s law to conclude that:
a) it is not a proper function of governments to try to manipulate the economy to “deliver” profits to a politically favoured sub-group of the population
b) there is not necessarily any reason knowable to governments why any given farm should be profitable or not, let alone a whole sector. This can only be known on an enterprise by enterprise basis, on the basis of market performance in the real world. It cannot be known in the abstract based on statistical correlations and boffin “equilibrium” modelling.
c) The assumption that government has superior knowledge, capacity and virtue to manage the economy has no basis in reality or rationality.

The tariff board was altered to become the Industries Assistance Commission (IAC), subsequently the Industries Commission (IC) and now the Productivity Commission (PC), this is a progression along a path toward unfettered free markets, this direction was completed via the Hilmer review into competition policy and its enactment.

Ben your description is how on ground farmers see the real world with their daily inputs to business getting dearer and dearer each year, their ability to operate removed over time and scale makes little difference.

It seems to me that you Ben, deal in empirical data while the free marketers deal in models, we are sold the deal "because the model says it will be better on the other side" yet we never test the reality, and to be frank I doubt any model has any way of accurately predicting the future, take a look at the whether blokes, I doubt they get one in ten accurate, and this compared to empirical data based on real outcomes.

I notice in one of the later posts an effort at personal denigration, I can only assume the author is rather out on a limb with a failed ideology, we should simply chop the limb off so the tree can live.

Further a suggestion government is intervening all over the place in rural Australia verifies to me that not only does this writer have no knowledge of the bush but is living in the past. Market power imbalance is pervasive throughout our entire agricultural system and nobody who lives it would misunderstand that. to fix the problems something has to be done, I assume the Austrians would see nothing wrong with collapsing markets, reasonable income distribution would not one of their priorities. Stability not a high priority either.

Congratulation to ON Line Opinion for the debate

Jardine K Jardine
“ It shows that government failed in its stated purpose in interfering in an attempt to cause one favoured group to get higher profits. At no time has the author attempted to justify such interference for such aims. Nor has he considered whether the downside to farmers was outweighed by a greater benefit to the rest of society.”
Farmers have not been a favoured group for a very long time. Can you please explain why you think farmers going broke can be a benefit to society? We aren’t talking about pink Barbie dolls here where the product can be just lived without unless you subscribe to the school of thought that thinks food comes on styrofoam trays wrapped in plastic.
Your comments show a complete ignorance of how free markets operate in a price taking situation. In such a situation the free market does eventually break down. The free market has never come up with a solution for this except regulation in the form of anti-trust laws of various sorts. It is an economic reality which is poorly understood by most who are not at the pointy end of the market.
Our farmers mostly sell into a monopsony (one powerful buyer) or a duopoly and they do not set the prices. Do you think this is acceptable?
Sovereign risk has become an ever present intruder in the lives of our agricultural community. Firstly it came in the form of environmental regulation which put a huge brake on production and productivity growth. It has even taken the form of embargoes on farmers using huge areas of their farms in some states. Is this all acceptable to you? Should farmers have to foot the bill for community environmental expectations?
The ultimate example was of course the live cattle export ban. The effects of that are still ongoing: depressed cattle prices, foreclosures, loss of support industries and suicides and not necessarily just in the live export production areas.