Tuesday, April 17, 2007

Doing the math...

Jim Wiesemeyer at ProFarmer has been doing yeomen's work at his column (sorry - subscription required) covering the development of the new farm bill. He often includes lengthy polemics from former Congressperson-turned-lobbyist Larry Combest. In his his latest chapter, Combest includes this familiar sounding "statistic"
U.S. agriculture creates 17% of U.S. GDP, $3.5 trillion in economic activity, and 25 million American jobs. As the December 17, 2003 Wall Street Journal article (Farm Belt Becomes Driver for the Overall Economy as Prices Rise, Spending Spreads to Tractors, Trucks), notes, “The present boom is proving that agriculture still matters in the U.S. Rising farm incomes are helping ease the blow of the loss of manufacturing jobs in the Midwest States.” The article then quotes the chief economist of a major U.S. bank who states, “The farm sector is a significant source of strength in the U.S. economy.” With such an important U.S. economic sector and jobs creator facing such unfair foreign trade conditions, why would anyone propose to tie the hands behind the backs of hard working U.S. farm and ranch families, all of whom are injured by these trading practices? [More - subscription] [My emphasis]

Wow! $3,500,000,000,000 from little ol' us out here on the farm. And we "created" it! Presumably by waving our magic economic wand.

I asked them where this number came from and received no reply, so here is what I came up with myself.

I don't think that's how the authorized economic referees at the Department of Commerce see it. Or any real economists. Consider these facts from the latest GDP (2005) statistics.
Total GDP $12,456B
Value added by farms $95.9B
[Whole table - actually interesting]
Hmm, we seem to be a few trillion short. Even if we look at Gross Output we are only a tiny fraction of the national picture: $253B out of $22.9T

Look the numbers up for yourself and feel free to show me where the staggering number comes from.

I once asked a Farm Bureau spokesman where a similar number came from. It seems what we in ag do in order to seem larger than life is add in stuff like:
  • all food manufacturing
  • all food retailing and wholesaling
  • some part of clothing manufacturing/retailing
  • yadda, yadda
Which raises another perspective. If the food industry is a few trillion and ag is a few billion, which industry is part of which? The flea and the dog come to mind. Nor can we claim that it "starts" with us. As my fuel guy points out, nothing happens on my farm if he doesn't show up first. The petroleum industry could claim ag as part of their total using Combest's rules.

My point is this is a pretend number we use to enlarge our egos, not unlike mating birds fluffing their feathers out.

We don't begin to create $3.5T of wealth. If we do, we are remarkably poor at hanging onto any of it.

I have been told that questioning such inflated numbers is disrespectful to farmers.

Yeah - right. Telling us fairy tales is treating us like adults.

Agriculture is a important part of a huge food industry. Our economy is not about us and this constant, overwrought chest-beating is not helpful as we become more integrated with the other sectors.

BTW - I wasn't the only guy who questioned Combest's numbers (look, just buy a membership, OK? You'll thank me later).


Anonymous said...

You insist on bringing stubborn facts into the debate! Can't you leave us in our fantasy world of self importance?

western n y said...

Food is always the begining of the economic cycle . Idon't believe anybody can be a productive member of the work force until they eat for at least eighteen years . We were "hunters and gatherers " before we relied on others for some of our input items .

John Phipps said...

What I think is most important here is to recognize we are part of a production chain - not the creators ex nihilo of foodstuffs.

In reality we are manufacturers, buying inputs and adding value. While our antecedents may have wandered into the wilderness and sent a stream of production out - we do not.

As for hunter-gatherers, my understanding is our brains would be much smaller and lifespans shorter had we not invented agriculture.