A Bumper Crop of Industrial Hypocrisy

Picture, in this era of ruthlessly competitive global markets, a strategically vital industry running a healthy $18-billion annual trade surplus. Now factor in that this industry receives more than $10 billion in direct government subsidies and more than $1.2 billion in government-sponsored high-tech research and development.

If Japan were doing this in silicon chips or West Germany in numerically controlled machine tools, the United States would be quick to threaten Super 301 trade sanctions. The free marketeers in Washington would piously call for “level playing fields” and warn of the pernicious evils of “industrial policy.”

Of course, that “strategically vital industry” is America’s own agriculture. In fact, the United States has a long, rich (and expensive) history of government involvement in agriculture. From the Morrill Act of 1862 that established the land-grant colleges to today’s emerging cornucopia of plant biotechnologies, it’s impossible to imagine American agribusiness being so global without the not-so-invisible hand of American government.

By any measure you wish to apply, every element of U.S. agribusiness history practically shrieks “industrial policy.” “We’ve had a ‘cheap food’ policy in this country for years, using income transfers and other techniques to keep prices down,” says Harold O. Carter, professor of agricultural economics and director of the UC Agricultural Issues Center at UC Davis. “We’d be aghast if people had to pay $2 a pound for poultry.”

(By contrast, Carter says, European countries “really pampered” their farmers and that’s why “food costs there have been so fantastic.”)

The Agricultural Extension Service, the massively elaborate labyrinth of loans, subsidies and loan guarantees, and a willingness to fund new technologies have made the Department of Agriculture arguably one of the most successful practitioners of industrial policy. Today, as advances in biotechnology promise to transform agriculture, the USDA has cleverly positioned itself as a seed capitalist in this arena.

“The USDA is clearly moving more toward science-based agricultural investments,” asserts Mark F. Cantley, head of the European Economic Community’s Concertation Unit for Biotechnology in Europe. Indeed, several European nations have quietly expressed unhappiness over America’s increasing competitiveness in agricultural biotechnology.

I’m confused. When we talk about creating a new partnership between government and high-technology industries such as semiconductors, policy-makers thrust the free-market crucifix at the budget-sucking vampires of “industrial policy.” When we continue a century-old tradition of technology transfer, educational investment and technological innovation in agriculture, it’s called: nothing. There’s nary a whisper in the cacophony of policy debate.

When the head of the Defense Advanced Research Projects Agency (DARPA)--the Pentagon’s high-tech venture capital arm--champions the idea of investing to improve our industrial base, he gets demoted. When the USDA champions the idea of investing in new materials research and developing new agricultural products, it gets an R&D; budget of more than $1.2 billion. Trust me, agricultural biotechnology is at least as high tech as anything the Pentagon funds.

Irony is too nice a word to describe what’s going on here. Washington is one of those towns where, if you’re enough of a hypocrite, people actually start thinking you’re a pragmatist. Intellectual integrity becomes a luxury to be jettisoned at the first sign of a negative poll. The Washington troika of Richard G. Darman, Michael J. Boskin and John H. Sununu can bray all they want about the economic sins of industrial policy--but, clever gentlemen that they are, they also know how to count votes.

Apply the same standards of free-market philosophical purity to the USDA that these policy-makers profess, and the agency would be defunded. That will never happen. The political power of the Farm Belt, California and Texas is just too strong. What’s more, there are actually legislators who care about upgrading the quality of life in rural America; there are people who want to use the agricultural infrastructure to make sure that America’s farmers have ready access to tools and techniques to make them more productive.

Is there a legitimate role for government here? “Yes, in terms of maintaining our competitiveness, reducing dependence on subsidies and creating new products and services,” says USDA Assistant Secretary for Science and Education Charles E. Hess, formerly the dean of the College of Agriculture at UC Davis.

Indeed, Hess points out, Sen. John Glenn (D-Ohio) required that the USDA spend $50 million to help farmers explore “non-feed, non-food” crops for their lands. Hess sees the USDA playing a more aggressive role in promoting the development of biodegradable materials and as a “positive source” of plant-based fuels such as methanol versus fossil fuels such as oil and coal to combat air pollution.

What’s more, “after a fair amount of discussion” with the Office of Management and Budget, says Hess, the USDA could actually fund initiatives to commercialize emerging agricultural technologies.

The lesson here is a cynical one: The “debates” surrounding industrial policy in Washington have little to do with principle and a fundamental belief in the strength of free markets. On the contrary, our experience with agriculture proves that the government can be a powerful and productive partner with private industry. Talk with anyone in agribusiness, and they will tell you that the networks of land-grant colleges, the Agricultural Extension Service and the research stations played a critical role in consolidating America’s agricultural pre-eminence.

What the debates about industrial policy and high technology really reveal is that America’s high-tech companies lack political clout. The Intels, Motorolas, Hewlett-Packards and Crays may be technical wizards, but they are legislative eunuches. They are incapable of mustering the sort of political pressure, political action committee money and votes that agribusiness historically has.

I want to make it clear that I’m not a big fan of government intervention in specific industries; I would be leery of any kind of American Ministry of International Trade and Industry or civilian DARPA. On the other hand, I’m a huge fan of honesty and integrity. Those are two qualities that too many high-ranking Washington policy-makers have made optional.