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The reason farmers sought market power back then

The following contains excerpts from comments to the recent Fields on Wheels conference by Paul Earl, who has a PhD in history and is acting director of the University of Manitoba’s Transport Institute. Earl spent many years working for United Grain Growers and the Western Canadian Grain Growers Association lobbying the federal government to end the Canadian Wheat Board’s monopoly. He reflected on why the Prairie grain co-operatives, which he argues were opposed to free enterprise, became so powerful.

This was the period of the so-called “robber barons.” It was a period when arguably free enterprise really wasn’t working as it should.

They weren’t the only people identifying problems with free enterprise at the time. It’s arguable that unequal power had developed in the latter part of the 19th century and in the early 20th. This was actually free enterprise malfunctioning at the time because of power relationships. Adam Smith had even foreseen this.

An important assumption within free enterprise is that economic contracts are voluntary. If they’re not voluntary then it’s not free enterprise. So if you have imbalances of power free enterprise starts to be unfree… it starts to malfunction.

And what they tried to do with United Grain Growers, with the Pools and eventually with the Canadian Wheat Board was level the playing field — give farmers control and power in the marketplace. And of course they got it. The Pools and the wheat board were extremely powerful organizations. Lo and behold that power was not always exercised in the best way.

What strikes me as worthy of a great deal of thought is that the deregulation of the grain industry and the end of farmers’ involvement — because the pools are gone, UGG is gone, the Canadian Wheat Board is gone — the end of that farmer control in the industry comes precisely at a time when we see economic and social forces within free enterprise today looking a heck of a lot like it looked in 1900, in other words, very substantial imbalances of power.

So I think this is something farmers should be thinking about. My own thinking, having spent a lot of time looking at the grain industry and thinking about this business of how free enterprise operates is this: First of all there is no doubt that free enterprise works better than the alternatives.

But the second thing is that free enterprise only works if the fundamental assumptions hold. And this most important fundamental assumption is all contracts are voluntary.

And thirdly in order for free enterprise to work successfully sometimes interventions are necessary. And mostly those interventions are necessary to balance economic power.

Farmers have to think what they have lost in terms of farmer control. Is it something they need to find a new way to implement? Will they find themselves over the next 10, 20, 30 years disadvantaged by imbalances in the marketplace?

I don’t have answers to these questions, but I think they are questions that should be addressed. My own finding from all my old friends at the wheat growers is that farmer control has such a bad odour — there are so many bad examples of how it should not have been done over the last 50 years — that they don’t even want to talk about it. In that I think they are short sighted and I think that perhaps is one of the major issues about deregulation going forward.



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