Keep going guys!
An amazing debate is going on in the comments section of the subsidies post. Am copy pasting it here, so people can read it properly, and participate.
Ashish, Prashant, both you guys are adding a lot of "value" (to use a marketing cliche) to my blog. Keep going. Will join in with my views too.
#1 Dec 16 2004, 02:36 am
Not only we should remove subsidies given to our farmers but we should open up agricultural imports and enjoy the benefits of foriegn subsidies. See my post for a detailed take on this.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#2 Dec 16 2004, 10:32 am
I strongly disagree with ashish.
If India removes all the barriers on food import that is bound to make almost 700 million people(dependant on farming) jobless.Whats your take on it ?
I am not opposing free trade but before that give our farmers a level playing field.
I often pity the psyche of so called white collared middle class.They will pay any (printed MRP )amount for buying fairness creams and talcom powder but will often indulge in bargaining for the price of vegetables produced by poor farmers.
Farming in our country is strange business.You don't have control over inputs like rains,weather etc.You don't have control over the price of product you are producing.Compare this with any other product like toothpaste.
By importing food which poor's will get benefitted ? Or do you want to provide this food to poor free of cost ? because most of the poors are farm labourers which will eventually have no work because of inability of local farmers to compete with more efficient(due to any number of reasons) farmers abroad.
and as far as subsidies are concerned they are actually benefitting the end buyers as farmers cannot consume what all he produces.ultimately the end buyer is getting benefitted.
Abolish the subsidies but then give the farmers right to decide the price of their product(which is highly impractical depending upon demand/supply).
Enable our farmers to compete with their counterparts.
At last don't forget with all this outsourcing,IT happening farming is still biggest employment generator in this country.
prashant [] []
--------------------------------------------------------------------------------
#3 Dec 16 2004, 12:11 pm
Prashant,
I received your comment by email but when I went to my blog, I could not see it. Actually, I have switched to HaloScan comment system from Blogger but your comment was recorded by Blogger. So, I am confused. So, I am responding here.
Firstly, I don't understand why 700 million farmers (and all other dependent on farming) will remain unemployment for long. Indian consumers will save money on food (and so will the farmers themselves). This will create demand for other products and services. Thus some of the unemployed will find employment in these new areas. Also, as some of these people move to the new areas of demand, those remaining will find much secure employment in farming (because of reduced competition and leveling of prices). Good example is agro-processing industries.
What do you mean by level playing field? And on what basis are Indian consumers obligated to farmers to provide the same?
Any business in the long run faces almost same level of difficulties. If business is easy to run (e.g. toothpaste) then it will attract more competitors. Business which is difficult to run will have less competition. Thus, the total difficult of the business (difficulty of running of the business + difficulty of competition) will remain same for all business (in the long run).
As I said earlier, poor farmers will find employment in new industries created because of shift in demand. They will also enjoy the benefits of cheaper food. Thus overall benefit of freeing the imports is significant.
So, according to you subsidies are benefitting the end buyer and not the farmers. In that case, removal of subsidies will at worse simply maintain the status quo. So, I don't understand why you are making creation of level-playing field a precondition for removal of subsidies.
No player in the market has the ability to decide the price and quantity at the same time. You can control price but then quantity sold will be based on demand. If you decide the quantity to be sold (and manufactured) then prices will be driven by the demand.
Nobody is obliged to enable anybody else to compete with anybody. What gave farmers right to expect such a gurantee from Indian consumers?
Farming is biggest employment generator in the country precisely because of import restrictions on food products. So, you can't use that as a argument against removal of the import restriction. It is nothing but a circular argument.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#4 Dec 16 2004, 12:11 pm
The principle of comparative advantage states that a country A, which is best at producing two products relative to a country B will still find it beneficial to trade with B. Country A should (and will eventually) concentrate on producing a product in which it is comparatively best while importing the other product from country B. To give a simple example, a skilled doctor who is also best at cooking will still find it sensible to employ a cook (eventhough the doctor is a better cook than the one he is employing). That is because, doctor has higher relative advantage in practicing medicine than the relative advantage he has in cooking over the cook he is planning to employ. Any time spent by the doctor in cooking will mean lost wages (higher) in medicine practice.
Therefore, eventhough farmers in India are not as competitive as farmers in other countries, they will eventually find employment in the field in which their relative advantage is least worst. Therefore, in a free market unemployment should be only occassional and rare.
This is not simply a question of theory. Just look at the goods and services that you purchase yourself inspite of the feeling that you can produce them better.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#5 Dec 16 2004, 03:21 pm
Ashish,
Your whole argument is somehow the farmers will find alternative employment if forced to look for.
Can you tell me one vertical's or industry's name which is capable of employing so many unskilled labours ?
What they have to do unless and untill they get skilled ?
You are right when you say nobody can decide prices of any product,it depends on demand-supply and such other parameters,which I duly appreciated in my post.
My whole argument was against cribbing of non-farmers against raise in prices of food commodities.If you accept price hike in petrol,why can't
you accept price hike in onion.Before 5 years rise in onion prices brought 4-5 govt's down,but no govt. comes down for keeping onion prices at
ridiculous,irrational low prices.This is direct result of not allowing export of surplus onion for fear of rise again in prices.But nobody raises a voice against
that.One more thing is you can bargain for vegetable and get it also for low price because some other farmer is ready to sell it for lesser than production price,
If he doesn't do so,his product will perish.I can tell hundreds of such instances of exlpoitation of farmers.
What I mean by level playing field is first give farmers some time to stand firmly on their feet,some time for them to enable themselves to compete.
In other industralized countries,they subsidize the inputs for food production bringing their production cost down.Plus in western countries one farmer owns say 100 acres of land
which brings total production cost down beacuse of economies of scale.Compare this with farmers owning .25 acre of land in India or any other third world country.
....... contd.......
prashant [] []
--------------------------------------------------------------------------------
#6 Dec 16 2004, 03:21 pm
You will say food processing industry is answer to all above problems.We don't need to go too far to see what can happen with them.Once co-operative sugar
factories of maharashtra were role models for entire country.See their sorry state of affairs today.Alongwith many other reasons like mismanagement,surplus
production of "processed food(read sugar)" was also one of the reason for their fall.
And last contrary to popular belief farming is also demanding job in comparison to other jobs.I can say it from my personal experience.
In lot of other white caller jobs processes are already set for most of the activities,plans are already laid out,but in farming you simply cannot have these.
Beacuse if you plan something by assuming tomorrow it will rain,what if it doesn't and so many things.
That's why we cannot consider farming as any other industry while talking about free trade and market economy and that sort.
prashant [] []
--------------------------------------------------------------------------------
#7 Dec 16 2004, 04:31 pm
My above comments will make anybody to believe that I am for giving subsidies to farmers.But I can state matter of factly that I am against it.
ABOLISH THE SUBSIDIES,ANYWAY ITS NOT BENEFITTING THE FARMERS,ITS PRIMARY INTENDED PURPOSE.
Although India's forex reserves are overflowing for the time being,I have still not even mentioned the kind of strain food imports will put on our forex reserves,in my debate with Ashish.
I haven't yet mentioned that how dangerous it would be to depend on other countries for as essential thing as food.
I haven't yet mentioned what happened when we imported "Milo wheat" from US of A during pre green revolution days.US of A not only exported wheat but it also exported a deadly seeds of what is commonly known in rural areas as "congress gavat" or "gajar gavat".India must be loosing millions of dollars yearly for removal of this unwanted crop.
I would welcome even opposing comments for this ongoing healthy debate on Farming in general and subsidies in particular.
prashant [] []
--------------------------------------------------------------------------------
#8 Dec 16 2004, 10:04 pm
Prashant,
The farmers will get employed in various industries depending upon how the demand from Indian consumers shift. If Indian consumers decide to buy more prepared food from the savings (from importing cheaper food) they employment in that sector will grow. Take for example Lijjat papad. Another good example is when diary production in India increased because of Operation Flood it generated huge employment in co-operatives in Gujarat and elsewhere. Demand can shift into more than one sectors depending upon consumer preferences. I cannot (or infact nobody can) tell in advance what those sectors be. It may even happen that subsidies given by foriegn govt. is in few crops only. In that case, Indian farmers can shift production to remaining crops and thus some of them will find increased employment in that production. Nobody know what will happen in a marketplace in advance. That doesn't mean few producers have right to hold consumers at ranson till they find secured employment. Secured employment is not a right.
Secondly, as I mentioned clearly in the principle of comparative advantage, you don't have to wait till you develop skill to find employment. Unskilled people will get employment in a free market.
There is no point in arguing against consumer preferences. Not point in scolding them for bargaining in certain products. Bargaining by customers does not cause exploitation of producers. Forcing consumers to buy domestic products (using import restrictions) is exploitation.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#9 Dec 16 2004, 10:16 pm
"What I mean by level playing field is first give farmers some time to stand firmly on their feet,some time for them to enable themselves to compete. "
Some time? Is 50 years enough? No income taxes, free electricity and water, subsidizied seeds and fertilizers, no income taxes, subsidized loans from public banks and minimum purchase price guranteed by the Govt! The list goes on and on. Where do you stop! And we are exploiting farmers?
We have our own family owned land and I know amount of subsidies govt. provides. Everytime farmers agitate and Govt. then increases the minimum support price for purchase and FCI godown's are overfilled.
You are under illusion that we are providing help to the farmers on our own. No, we are being forced by Govt. (and farmer's lobby power). We can only resist. Your offer and plea for helping farming would have sounded credible if it was voluntary for us to help them. A person holding you at gunpoint cannot request help. He is going to rob you. You can convince yourself that you are helping him and thus avoid the feeling of impotency. If that's what you want to do then fine. Then keep talking about few years of level playing field and fair trade. Everybody knows what that means!
A company (i think it was E-Loan) in US gave US customers a choice to use customer service representatives in India or US when calling their toll-free line. Consistently US customers choose their loan applications to be processed cheaply by Indian service representatives. This inspite of all the bullshit talk about how outsourcing is destroying America.
If you believe we should care about farmers, then give Indian consumers a real choice by opening up imports. If Indian consumers really want to help Indian farmers then can still choose to buy Indian food produce. That will be a real moral choice.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#10 Dec 16 2004, 10:34 pm
"That's why we cannot consider farming as any other industry while talking about free trade and market economy and that sort. "
All you are saying is that farming is risky (it may not rain tomorrow). Just because a business is risky or unpredictable doesn't mean principle of free trade and market economy does not apply to it. A businessman (include farmer) chooses to accept risk in return for possible (not guranteed) rewards in the future.
As for co-operative industry in Maharashtra, it is so currently because of Govt. interference and politics. No business is guranteed to succeed. In a market some business are going to fail and some are going to rise.
In western countries, within few decades majority of population went from being employed in agriculture to being employed in industries and then finally services. So, same thing will happen in India. You need to stop worry about farmers.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#11 Dec 16 2004, 10:41 pm
As for forex reserves, they are not a property of the country. And decision to import food also is a not single decision made by the entire country simultaneously. I am only talking about opening up restrictions on food import. That doesn't mean every type of food will be imported by consumers. Depending up on price, quality and quantity different decisions will be made by different consumers. Most likely, foriegn Govt. will not able to subsidize all food production. Neither will foriegn farmers be able to develop comparative advantage in production of all agricultural goods. So some will be imported and some will be exported.
I really don't understand why people aggregate data at the national level and think of it as a collective property. GDP is not the income of the nation. It is a statistics that you arrive by adding incomes of individuals in a country. Same think goes for forex reserves.
To give an idea of how individual decisions look when agregated at national level, think what will happen if instead of each individual deciding whether to marry based on his/her own personal circumstances and proposals before him/her, if we agregate that decision into one big national decision of whether marriage is good or bad. If enough people think it is bad, we outlaw marriage otherwise we allow it.
When it comes to imports and worrying about forex reserves you are doing the same thing.
Ashish [] [homepage]
Ashish, Prashant, both you guys are adding a lot of "value" (to use a marketing cliche) to my blog. Keep going. Will join in with my views too.
#1 Dec 16 2004, 02:36 am
Not only we should remove subsidies given to our farmers but we should open up agricultural imports and enjoy the benefits of foriegn subsidies. See my post for a detailed take on this.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#2 Dec 16 2004, 10:32 am
I strongly disagree with ashish.
If India removes all the barriers on food import that is bound to make almost 700 million people(dependant on farming) jobless.Whats your take on it ?
I am not opposing free trade but before that give our farmers a level playing field.
I often pity the psyche of so called white collared middle class.They will pay any (printed MRP )amount for buying fairness creams and talcom powder but will often indulge in bargaining for the price of vegetables produced by poor farmers.
Farming in our country is strange business.You don't have control over inputs like rains,weather etc.You don't have control over the price of product you are producing.Compare this with any other product like toothpaste.
By importing food which poor's will get benefitted ? Or do you want to provide this food to poor free of cost ? because most of the poors are farm labourers which will eventually have no work because of inability of local farmers to compete with more efficient(due to any number of reasons) farmers abroad.
and as far as subsidies are concerned they are actually benefitting the end buyers as farmers cannot consume what all he produces.ultimately the end buyer is getting benefitted.
Abolish the subsidies but then give the farmers right to decide the price of their product(which is highly impractical depending upon demand/supply).
Enable our farmers to compete with their counterparts.
At last don't forget with all this outsourcing,IT happening farming is still biggest employment generator in this country.
prashant [] []
--------------------------------------------------------------------------------
#3 Dec 16 2004, 12:11 pm
Prashant,
I received your comment by email but when I went to my blog, I could not see it. Actually, I have switched to HaloScan comment system from Blogger but your comment was recorded by Blogger. So, I am confused. So, I am responding here.
Firstly, I don't understand why 700 million farmers (and all other dependent on farming) will remain unemployment for long. Indian consumers will save money on food (and so will the farmers themselves). This will create demand for other products and services. Thus some of the unemployed will find employment in these new areas. Also, as some of these people move to the new areas of demand, those remaining will find much secure employment in farming (because of reduced competition and leveling of prices). Good example is agro-processing industries.
What do you mean by level playing field? And on what basis are Indian consumers obligated to farmers to provide the same?
Any business in the long run faces almost same level of difficulties. If business is easy to run (e.g. toothpaste) then it will attract more competitors. Business which is difficult to run will have less competition. Thus, the total difficult of the business (difficulty of running of the business + difficulty of competition) will remain same for all business (in the long run).
As I said earlier, poor farmers will find employment in new industries created because of shift in demand. They will also enjoy the benefits of cheaper food. Thus overall benefit of freeing the imports is significant.
So, according to you subsidies are benefitting the end buyer and not the farmers. In that case, removal of subsidies will at worse simply maintain the status quo. So, I don't understand why you are making creation of level-playing field a precondition for removal of subsidies.
No player in the market has the ability to decide the price and quantity at the same time. You can control price but then quantity sold will be based on demand. If you decide the quantity to be sold (and manufactured) then prices will be driven by the demand.
Nobody is obliged to enable anybody else to compete with anybody. What gave farmers right to expect such a gurantee from Indian consumers?
Farming is biggest employment generator in the country precisely because of import restrictions on food products. So, you can't use that as a argument against removal of the import restriction. It is nothing but a circular argument.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#4 Dec 16 2004, 12:11 pm
The principle of comparative advantage states that a country A, which is best at producing two products relative to a country B will still find it beneficial to trade with B. Country A should (and will eventually) concentrate on producing a product in which it is comparatively best while importing the other product from country B. To give a simple example, a skilled doctor who is also best at cooking will still find it sensible to employ a cook (eventhough the doctor is a better cook than the one he is employing). That is because, doctor has higher relative advantage in practicing medicine than the relative advantage he has in cooking over the cook he is planning to employ. Any time spent by the doctor in cooking will mean lost wages (higher) in medicine practice.
Therefore, eventhough farmers in India are not as competitive as farmers in other countries, they will eventually find employment in the field in which their relative advantage is least worst. Therefore, in a free market unemployment should be only occassional and rare.
This is not simply a question of theory. Just look at the goods and services that you purchase yourself inspite of the feeling that you can produce them better.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#5 Dec 16 2004, 03:21 pm
Ashish,
Your whole argument is somehow the farmers will find alternative employment if forced to look for.
Can you tell me one vertical's or industry's name which is capable of employing so many unskilled labours ?
What they have to do unless and untill they get skilled ?
You are right when you say nobody can decide prices of any product,it depends on demand-supply and such other parameters,which I duly appreciated in my post.
My whole argument was against cribbing of non-farmers against raise in prices of food commodities.If you accept price hike in petrol,why can't
you accept price hike in onion.Before 5 years rise in onion prices brought 4-5 govt's down,but no govt. comes down for keeping onion prices at
ridiculous,irrational low prices.This is direct result of not allowing export of surplus onion for fear of rise again in prices.But nobody raises a voice against
that.One more thing is you can bargain for vegetable and get it also for low price because some other farmer is ready to sell it for lesser than production price,
If he doesn't do so,his product will perish.I can tell hundreds of such instances of exlpoitation of farmers.
What I mean by level playing field is first give farmers some time to stand firmly on their feet,some time for them to enable themselves to compete.
In other industralized countries,they subsidize the inputs for food production bringing their production cost down.Plus in western countries one farmer owns say 100 acres of land
which brings total production cost down beacuse of economies of scale.Compare this with farmers owning .25 acre of land in India or any other third world country.
....... contd.......
prashant [] []
--------------------------------------------------------------------------------
#6 Dec 16 2004, 03:21 pm
You will say food processing industry is answer to all above problems.We don't need to go too far to see what can happen with them.Once co-operative sugar
factories of maharashtra were role models for entire country.See their sorry state of affairs today.Alongwith many other reasons like mismanagement,surplus
production of "processed food(read sugar)" was also one of the reason for their fall.
And last contrary to popular belief farming is also demanding job in comparison to other jobs.I can say it from my personal experience.
In lot of other white caller jobs processes are already set for most of the activities,plans are already laid out,but in farming you simply cannot have these.
Beacuse if you plan something by assuming tomorrow it will rain,what if it doesn't and so many things.
That's why we cannot consider farming as any other industry while talking about free trade and market economy and that sort.
prashant [] []
--------------------------------------------------------------------------------
#7 Dec 16 2004, 04:31 pm
My above comments will make anybody to believe that I am for giving subsidies to farmers.But I can state matter of factly that I am against it.
ABOLISH THE SUBSIDIES,ANYWAY ITS NOT BENEFITTING THE FARMERS,ITS PRIMARY INTENDED PURPOSE.
Although India's forex reserves are overflowing for the time being,I have still not even mentioned the kind of strain food imports will put on our forex reserves,in my debate with Ashish.
I haven't yet mentioned that how dangerous it would be to depend on other countries for as essential thing as food.
I haven't yet mentioned what happened when we imported "Milo wheat" from US of A during pre green revolution days.US of A not only exported wheat but it also exported a deadly seeds of what is commonly known in rural areas as "congress gavat" or "gajar gavat".India must be loosing millions of dollars yearly for removal of this unwanted crop.
I would welcome even opposing comments for this ongoing healthy debate on Farming in general and subsidies in particular.
prashant [] []
--------------------------------------------------------------------------------
#8 Dec 16 2004, 10:04 pm
Prashant,
The farmers will get employed in various industries depending upon how the demand from Indian consumers shift. If Indian consumers decide to buy more prepared food from the savings (from importing cheaper food) they employment in that sector will grow. Take for example Lijjat papad. Another good example is when diary production in India increased because of Operation Flood it generated huge employment in co-operatives in Gujarat and elsewhere. Demand can shift into more than one sectors depending upon consumer preferences. I cannot (or infact nobody can) tell in advance what those sectors be. It may even happen that subsidies given by foriegn govt. is in few crops only. In that case, Indian farmers can shift production to remaining crops and thus some of them will find increased employment in that production. Nobody know what will happen in a marketplace in advance. That doesn't mean few producers have right to hold consumers at ranson till they find secured employment. Secured employment is not a right.
Secondly, as I mentioned clearly in the principle of comparative advantage, you don't have to wait till you develop skill to find employment. Unskilled people will get employment in a free market.
There is no point in arguing against consumer preferences. Not point in scolding them for bargaining in certain products. Bargaining by customers does not cause exploitation of producers. Forcing consumers to buy domestic products (using import restrictions) is exploitation.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#9 Dec 16 2004, 10:16 pm
"What I mean by level playing field is first give farmers some time to stand firmly on their feet,some time for them to enable themselves to compete. "
Some time? Is 50 years enough? No income taxes, free electricity and water, subsidizied seeds and fertilizers, no income taxes, subsidized loans from public banks and minimum purchase price guranteed by the Govt! The list goes on and on. Where do you stop! And we are exploiting farmers?
We have our own family owned land and I know amount of subsidies govt. provides. Everytime farmers agitate and Govt. then increases the minimum support price for purchase and FCI godown's are overfilled.
You are under illusion that we are providing help to the farmers on our own. No, we are being forced by Govt. (and farmer's lobby power). We can only resist. Your offer and plea for helping farming would have sounded credible if it was voluntary for us to help them. A person holding you at gunpoint cannot request help. He is going to rob you. You can convince yourself that you are helping him and thus avoid the feeling of impotency. If that's what you want to do then fine. Then keep talking about few years of level playing field and fair trade. Everybody knows what that means!
A company (i think it was E-Loan) in US gave US customers a choice to use customer service representatives in India or US when calling their toll-free line. Consistently US customers choose their loan applications to be processed cheaply by Indian service representatives. This inspite of all the bullshit talk about how outsourcing is destroying America.
If you believe we should care about farmers, then give Indian consumers a real choice by opening up imports. If Indian consumers really want to help Indian farmers then can still choose to buy Indian food produce. That will be a real moral choice.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#10 Dec 16 2004, 10:34 pm
"That's why we cannot consider farming as any other industry while talking about free trade and market economy and that sort. "
All you are saying is that farming is risky (it may not rain tomorrow). Just because a business is risky or unpredictable doesn't mean principle of free trade and market economy does not apply to it. A businessman (include farmer) chooses to accept risk in return for possible (not guranteed) rewards in the future.
As for co-operative industry in Maharashtra, it is so currently because of Govt. interference and politics. No business is guranteed to succeed. In a market some business are going to fail and some are going to rise.
In western countries, within few decades majority of population went from being employed in agriculture to being employed in industries and then finally services. So, same thing will happen in India. You need to stop worry about farmers.
Ashish [] [homepage]
--------------------------------------------------------------------------------
#11 Dec 16 2004, 10:41 pm
As for forex reserves, they are not a property of the country. And decision to import food also is a not single decision made by the entire country simultaneously. I am only talking about opening up restrictions on food import. That doesn't mean every type of food will be imported by consumers. Depending up on price, quality and quantity different decisions will be made by different consumers. Most likely, foriegn Govt. will not able to subsidize all food production. Neither will foriegn farmers be able to develop comparative advantage in production of all agricultural goods. So some will be imported and some will be exported.
I really don't understand why people aggregate data at the national level and think of it as a collective property. GDP is not the income of the nation. It is a statistics that you arrive by adding incomes of individuals in a country. Same think goes for forex reserves.
To give an idea of how individual decisions look when agregated at national level, think what will happen if instead of each individual deciding whether to marry based on his/her own personal circumstances and proposals before him/her, if we agregate that decision into one big national decision of whether marriage is good or bad. If enough people think it is bad, we outlaw marriage otherwise we allow it.
When it comes to imports and worrying about forex reserves you are doing the same thing.
Ashish [] [homepage]
