First application of the peasant economics research

In Survival Podcast Episode-802- Permaculture Misconception vs. Reality (@29m45), Jack Spirko talks about reducing the size of the average farm so the average farmer can make a living on 40-80 acres like they used to. Currently, farmers with a thousand acres might earn $25,000 including subsidies. Permaculture would mean growing 4 acres of premium corn and lots of other things, as well, and earning a decent living doing it. Jack states that the farmer would have to hire people to pick instead of using machinery, which would cost more but be good for the economy and make a more sustainable local economy.

Theory from the research on the economics of peasant farms:

• This will drive food prices up
• which will decrease the purchasing power of wages in other sectors
• but will probably drive wages up in those other sectors due to less competition for jobs
• which may decrease activity in those other sectors
• but either way it will provide more employment on the land
• which will encourage migration out of other sectors and back to agriculture and into the countryside (this would be true in the U.S., now, since rural areas are now so sparsely populated, whereas in the Old World the same dynamic would have checked the initial migration into industrial employment and encouraged people to stay on the land)
• BUT, it's possible we've reached a tipping point where we can no longer depend on ongoing industrial growth and need to move people back into the country to take up the surplus labor from the city
• ALSO, the farmer may not have to hire a bunch of laborers for harvest, because he will have the labor necessary on site to handle the harvest, as 4 acres of corn is not an overwhelming amount and sufficient labor can be kept employed the rest of the year at other tasks due to the diversity of on-farm operations; e.g. livestock, forestry, fiber, homestead activities (fixing the roof), etc.

Jack also suggests people start producing 10-25% of their own food locally, so farmers don't have to make as much for us.

So what would it mean to move people back into agriculture?

It might look like this:

Agriculture would need to become more labor intensive if more people were to be employed farming. To have stable employment on the land, you would need a diversified family farm-type model, otherwise you will need large labor inputs at particular times which means a large demand for migratory labor, which is problematic. A diversified family farm would likely result in better soil fertility and higher yields - along with more work but the work would be spread more evenly throughout the year. More farm income would be re-invested back into individual farms, which traditionally prevented capital accumulation, but chances are good that industry is well-enough developed at this point that capital would still exist for useful large-scale infrastructure projects, though on credit. Cooperatives could play a strong role in this if we'd rather keep creditors, the state, and large-scale capitalist agribusiness out.

The price of food would go up but wages in all other sectors would also go up due to less labor competition in other sectors. This would be the inverse of the scenario Doreen Warriner demonstrates in her book. Probably the price of food would rise more than wages, so the proportion of income a family spent on food would increase. The consumer would be paying for farm biodiversity and soil conservation. Some of the additional costs of labor-intensive agriculture, however, would be defrayed by the fact that the farmer would also be providing for more of their own needs, due to the availability of their own labor during the down periods of the farm cycle. In other words, they would need less disposable income because they could be growing and making more of their own stuff, or via a cooperative enterprise (e.g., a community-owned biogas plant for transforming farm waste). A diversity of on-farm enterprises would also create economic resilience for individual farms.

Support for this theory from Warriner: In the scenario (c. 1939) where Western European tariffs were removed, Eastern European wheat would come in at half the cost (I assume the equilibrium would be reached for both at around 75% the pre-tariff cost)...

In Western Europe the industrial population would gain through cheaper food, but would find the adjustment in the labour market through the influx of labor from the land a very serious one...Free trade inside Europe would inevitably mean a big displacement of labour in the West. (p197)

We can assume that the original decrease of food costs as a result of large-scale mechanization had a comparable impact on the population of the U.S., sending many farmers into the industrial labor pool. We need only reverse this pattern to see that sending people back out of the industrial labor pool and onto farms would have the opposite effect of increasing food costs and decreasing labor competition. Food prices go up, wages go up. In fact, in the foreward, she notes the reversal that came as a result of Eastern Europe becoming a net importer of grain in the years between 1939-1964:

So the priorities of 1939 are now reversed. Then industrial development was the first; now it is increased food production. The movement of population into industry creates a demand for food which agriculture cannot supply, partly for lack of capital, and partly for lack of incentive.

A big potential issue affecting the livelihoods of the new small farmers, however, would be land ownership. If the massive tracts of land currently owned by agribusiness were rented out, or if farmers were hired on as independent contractors working a chunk of land in a way that's dictated by the landowners, you would have virtual serfdom. The landowners could charge enough to make farming anything but lucrative. Farmers would need to own their land for this to work well. It's the difference between the Bulgarian peasants (land-owning, organized) and the Hungarian peasants (landless, disorganized) in the 1930s. It's hard to imagine this working in the U.S. without some sort of land reform, which is tough to imagine at all. Even in an era of smaller-scale farming (due to peak oil or what-have-you), the large land-owning agribusiness giants could easily turn into something like feudal lords.

Capital accumulation - a thought experiment 3

Part 1
Part 2

So how does labor result in capital accumulation?

You are a hunter-gatherer living in the forest 10,000 years ago. When you wake up in the morning, you have approximately 16 hours before you go to sleep again, which is your available time per day to do things, to labor. The amount of work you put into anything can be thought of as a product of the amount of time you spend on it and the amount of effort you put into it. LABOR = TIME * EFFORT. For simplicity, let's say that effort is simply the energy, in calories, that you expend doing the work.

(Preview of coming attractions: PRODUCTIVITY = LABOR * CAPITAL... a product of how hard you work and your training, available tools, etc.)

Only once you have done everything you need to do to ensure your survival until the next day can you move on to other things. Your labor is first and foremost dedicated to your immediate survival, after which you move on to ensuring your ongoing survival to the best of your ability. Immediate needs include not starving, not freezing, not being eaten by a tiger, and so on. These tend to be reactive. Ensuring your ongoing survival means expending additional effort to proactively plan for ensuring these needs are met in the future. This might mean laying (or making) a trap line, gathering storable tubers, building a hut, or tanning a hide.

Let's consider this in terms of stocks and flows. Your basic needs are a stock that needs to be kept at a certain level to ensure your immediate survival, and your labor is the inflow which maintains this basic level of stock. Labor is also an outflow, in that work takes energy--you get energy from the food you work to procure, and spend some of that energy procuring food. Generally it more than pays for itself, which results in surplus. The difference between how much energy it takes you to procure food and how much energy the food gives you is the first labor surplus, a surplus of energy.

CALORIES GAINED FROM PREY - CALORIES EXPENDED DURING HUNT = ENERGY SURPLUS

If you're below the line here, you're in trouble, and aren't going to live for very long. If you're above the line, however, you have your first bit of extra energy which can be used for another activity. What are you going to do with it?

Option A: Build a better spear
Option B: Build a hut
Option C: Learn a cool dance move to impress a potential mate

Which you decide to do depends on which option you think is most useful and how secure you feel in your current predicament. If you're just barely coming out ahead, and your main problem is that you're sleeping outside and burning a lot of calories trying to stay warm, you might want to build a hut. If your main problem is that it took you ten throws before your spear pierced a deer, you might want to build a better spear. Either way, unless you're feeling pretty secure in your ability to consistently procure more calories than you expend procuring them, you're not likely to be focusing on cool dance moves.

Now, consider the scenario in which you decide to build a better spear. You now have two spears. If you don't want to be carrying both of them, you might decide to give the old one to your hunting buddy, who broke his last week. Two things just happened here:

1. your surplus of energy resulted in net capital accumulation for your little hunting society, which benefits both of you by (a) getting your buddy back in the game quicker, (b) getting your buddy back in the game quicker...the first for his sake and the second for yours

2. your buddy now owes you one. He may use some of his surplus energy sometime down the line to teach you a cool dance move.

This is net social capital accumulation. It occurs when your society captures the surplus value from work. The spear is the product of the energy of your labor and the materials used in its construction. Your surplus energy resulted in an extra tool. How valuable it is depends on not just on the time you spent making it but on how well it's made (skill, or human capital). Once brought into existence by your flow of labor, this tool increases your stock slightly above the level needed for bare survival, and frees up a bit of time for something other than spearmaking to occur. It also provides a buffer against disaster, in that if your new spear breaks, your buddy still has one (or if you kept it, you have an extra), and this can be all the difference in tiding you over till you get a new one.

To be continued...