Free Market Theory Falls on its Face

(A response to P. J. O'Rourke)

by Thayne Cozart
Director of Communications, National Organization for Raw Materials

P.J. O'Rourke recently published an opinion piece that was posted on the Internet. In his article, O'Rourke blasted American agricultural policy and the American way of producing food. O'Rourke argues that American consumers would eat better and cheaper under a totally free market approach. While he scores a point now and then, his basic logic is flawed to the core. Here's why:

The totally free market theory for agriculture falls on its face if carried to its logical conclusion. If it's always better to produce more and more cheaper and cheaper and with ever-improving efficiency, then utopia is full ag production with one producer with everything that producer grows selling at zero price.

That doesn't sound like people's capitalism to me. If O'Rourke is truly concerned about the masses having plenty to eat and the money to buy food, he'll never get there by putting underpriced raw materials on the market. The National Organization for Raw Materials has proven conclusively that underpriced raw foodstuffs do nothing but shortcircuit the "trade turn" of all raw materials and create debt in the process.

Today that ag trade turn is around nine to one: i.e. a dollar of wheat or beef or apples generates 9 dollars of economic activity on an earned income basis before its effect dwindles to zero. Here's what happens comparing $5 wheat to $3 wheat: A bushel of $5 wheat creates $45 of economic activity on an earned income basis. By comparison, a bushel of $3 wheat generates $27 of economic activity on an earned income basis and $18 of debt somewhere in the system. Whoever those folks are on the debt end of the stick very likely didn't eat as well as the rest -- unless they grew their own.