In last week's Sunday New York Times Magazine, an interesting article appeared that made me think of much of the agricultural policy work I've done over the past two years.  The article- written by Roger Lowenstein- had nothing to do with agriculture or rural communities per se.  Rather, it concerned Fannie Mae and Freddie Mac, and it discussed the recent bailout:

The Federal Reserve and the U.S. Treasury have lately widened the federal safety net more quickly and more aggressively than at any time since the New Deal era. Indeed, a recent front-page headline in this newspaper, “Confidence Ebbs for Bank Sector and Stocks Fall,” had distinctly Depression overtones. (You could almost envision the next line: “Hoover Urges Calm.”) And not since the Depression (under the Reconstruction Finance Corporation) has the government bought significant equity in private firms, as the Treasury has sought the authority to do in the case of Fannie Mae and Freddie Mac. At least during the 1930s, legislation followed months of deliberation and public hearings. The proffered fixes to today’s fast-moving crises are worked out hastily and in private.

More broadly, the article made me think of one of the guiding principles of the Center for Rural Affairs- that we're all better off if the assets of our country are held in many hands; if we have many small businesses and not a few large ones. 

A corollary to that principle is a recognition that market forces, left to their own devices, eventually work to concentrate wealth and power into the hands of the few.  Therefore, we need proper government policy to regulate markets (and their ill effects, when necessary) in order to ensure the well-being of society.  Not only that, but markets where wealth and power are extremely concentrated actually cease to be markets at all, with long-term devastating economic consequences.

This, of course, is one of the reasons we have antitrust law and various other regulations designed to limit the power of any single business.  But effective enforcement of antitrust law has largely disappeared in the past 27 years, and various other checks on corporate power have also been eviscerated (Glass-Steagall, etc).  And since that sort of regulation and enforcement have disappeared, we have an enormous problem hidden in plain sight, one that Lowenstein accurately diagnoses:

What failed this time were markets. The lenders who were supposed to regulate mortgage borrowing — and the credit-rating firms who monitored them — failed utterly. The investors whose job it was to monitor the capital of financial institutions were asleep at the switch...  [But] It is not really that simple, because investors were encouraged by the creeping government doctrine of “too big to fail.”

Too big to fail.  Those might just be the scariest four words in the English language today.  Because the reason companies like Fannie Mae and Freddie Mac are too big to fail is simply the first two words of that phrase- they're too big, and we let them get that way.  In fact, what should be said is they're too big to continue in their current form. 

Why, you may ask, is this relevant for agriculture?  Because we're approaching the point the "too big to fail" conundrum will apply to large parts of the agriculture sector.  Meatpacking is the most obvious industry.  Almost certainly, three companies will soon control over 70% of the beef processing capacity in the U.S.  Smithfield is an enormous hog producer that owns 1.1 million sows or so.  Smithfield buys somewhere in the neighborhood of 90% of the hogs produced in North Carolina.  What do you think would happen if Smithfield were to threaten bankruptcy and liquidation?  I can tell you just about every single hog farmer in North Carolina would scream for a government bailout, because if Smithfield went out, they would have nowhere to sell their hogs.  And Smithfield would be happy to point to all the "family farm hog producers" in an effort to get some federal money (or, say, in an effort to get ethanol mandates repealed).

It's no different when it comes to the seeds farmers must plant every year.  Monsanto and DuPont control an enormous share of the seed market, and you can just imagine the cries for a bailout if either one of them was on shaky financial footing.

And we're headed toward the "too big to fail" dilemma in grain production.  Previously, we had to support the farmer through farm programs to save rural communities.  Given the structure of farm programs, that was always a farce, one that is now nearly impossible to maintain.  Today we need farm programs to "assure our food supply" and 50 years from now it will be to prop up the 10,000 acre + farms that are "too big to fail".

Why should the sustainable agriculture community care?  Because the inherent unsustainable paradoxes of our industrial food system will perpetuate themselves- forever- if the "too big to fail" model is applied to vast sectors of agriculture.  There is a quiet assumption among many that industrial ag will topple as a result of its own ecological hubris and monoculture business model  that allows for little diversification of risk.  But if industrial ag is "too big to fail" and the feds will always step in, sustainable ag will have an incredibly difficult time ever being more than a bit player on the agricultural scene.

Thankfully, Lowenstein briefly suggests a solution: break these companies up.  Just as we did with AT&T (and came damn close to doing with Microsoft), we can do with the industrial ag behemoths of today.  Smithfield should be busted into smaller meatpacking companies, etc.  We don't have to force them out of business, not at all.  But if we sit around and wait for the subprime crisis of agriculture, you can be sure the calls for government intervention will sound the loudest from those who despise government regulation today.