Trump's Collision Course with Big Agribusiness

Relatively free trade has been the capitalists’ preferred solution to drive economic growth in recent decades, but with the system in crisis, politicians like Trump are turning back to protectionism in a nationalist appeal to win votes and protect US corporate interests. So far, he has been extraordinarily lucky, and the economy has continued to improve—at least on paper, and at least for the rich.

On the world market, the US is a net exporter of agricultural goods, and American farming interests depend on access to every possible market. The US has a substantial overall trade deficit with China, but registers a surplus in the case of agriculture, meaning China imports more food from the US than the US does from China. There are few sectors of American capitalists more dependent on trade with China than those who control the agriculture industry.

Trump’s billion-dollar trade war will, therefore, have a disproportionate effect on this sector. The Financial Times reported that “The tariffs would mean overall US soybean exports would fall 37%, with the economic impact on the US amounting to more than $3 billion a year, largely in the rural areas.”

Recriminations from a trade war will put Trump and his protectionist agenda at odds with both a layer of the capitalists in agriculture as well as his rural base.

This has led many American farm operators—a relatively affluent segment of society and an essential part of Trump’s political base—to oppose the new protectionism, though this was a key element of his electoral program. To help ease their pain and to try to keep them on board, the president has promised a series of new benefits for the agro-industrialists, adding up to more than $12 billion.

However, this is merely a stopgap measure that will ultimately fail to address the fundamental contradictions of trade and agriculture under capitalism. Even farm lobbying groups—while happily accepting the money—are campaigning for “trade, not aid,” and pushing for a speedy resolution of the ongoing disputes. Despite this, the Trump administration continues to escalate its tariff war with China, making it that much harder for these capitalists to continue backing him.

US agriculture is a relatively small component of overall GDP (roughly 5.5%), but in absolute numbers, US farms produce an enormous amount of the world’s food, with top agricultural products including corn, beef cattle, dairy cattle, chicken, soybeans, pork, wheat, and cotton. The primary productive factors associated with farming are labor, land, and equipment. Farm labor is intensely stratified. Some amount of farm labor is usually performed by the “principal operator” and their family. Demographically, the “principal operators” of US farms today are overwhelmingly white. While historically, the US had a large number of black farmers, vast numbers of black farm operators were forced out of the industry through a decades-long process that concentrated farms in the hands of fewer and richer operators in general. Since the end of World War II, American farms changed from a population of relatively independent, small farm operators, to a small minority of wealthy operators exploiting the labor of a proletarianized force of wage workers.

US farms depend on hundreds of thousands of hyperexploited undocumented workers, mostly from Mexico, to make their farms economically viable. The American Farm Bureau Federation estimates that “at least 50–70% of farm laborers in the country today are unauthorized,” and often make less than minimum wage. Farmworkers in the US are uniquely exploited, exposed to uniquely hazardous workplace conditions, and are uniquely subject to state violence, compared to other sectors of the working class. Farming’s dependence on exploited undocumented workers makes the farming labor reserve particularly sensitive to immigration crackdowns—another point where the interests of small capitalist farmers diverge from Trump’s.

The low prices of American agricultural goods—which are supported by subsidies—contributed to the mass migration of displaced peasants from Mexico to the US, where many continue to engage in agricultural production, but now on a more exploited and precarious basis. The availability of undocumented workers to work for rock-bottom wages, in turn, helps perpetuate the low price of American agricultural goods, thus perpetuating the cycle of exploitation and profit-taking.

US farms depend on hundreds of thousands of hyperexploited undocumented workers, mostly from Mexico, to make their farms economically viable.

US Agricultural production is highly concentrated, with the largest 65,300 farms accounting for 51% of the value of all US agricultural production and the 1 million smallest farms accounting for only 1%. This process of concentration has been dominated by finance capital. Modern farm equipment is extremely expensive—and without it, one can’t compete with the largest agricultural corporations. For example, a single harvester-combine costs hundreds of thousands of dollars, and virtually all farms, even large corporate ones, depend on credit to fund their operations. This has driven the creation of an entire financial industry dedicated to financing them.

The capitalist regime of farm management and subsidy attempts to resolve the risks of farming, but only in a particular way, and on a particular class basis. Inevitable contradictions arise when the frequent and heavy-handed interventions of the state in agricultural markets stop short of operating agriculture as part of a nationalized and rationally planned economy. Moreover, when these policies collide with the drive to expand the integration of world markets on a capitalist basis, even more chaos ensues, as we can see in the current swirl around trade.

Agriculture is the third-biggest US export industry, generating an estimated $21 billion trade surplus in 2018. A large portion of this surplus is soybean exports to China. Canada, China, and Mexico together account for 42% of US agricultural exports, so when Trump’s bombardments of tariffs on Chinese goods led to China imposing tariffs on US exports in response, the big farming interests stood to take a big part of the hit.

Historically, US farm subsidies were rolled out in a series of farm bills introducing different forms of supports including commodity price floors, crop insurance, disaster programs, and conservation payments. These policies were introduced in response to a long sequence of economic crises, in an effort to keep the sector from being wiped out by the “normal” operations of the market. These interventions served to consolidate the wealth and income of a small minority of the rural population, which in turn helped to cement the conservative influence of these areas in electoral politics. This has been an essential and conscious factor in maintaining support for the status quo.

An agricultural crisis typically occurs when two major risk centers for farms—production risk and credit risk—converge. One significant crisis took place in the 1980s, when tighter monetary policy converged with a collapse in international demand, leading to a mountain of new debt and a wave of foreclosures. Beginning in 1972, US farms had started exporting a large amount of grain to the USSR. This eventually led to a massive bubble, as US farmers became more indebted to expand to take advantage of increased prices and profitability. Nixon’s Agriculture Secretary, Earl Butz, urged farmers to “get big or get out,” to better take advantage of these favorable conditions.

Late in the decade, contractions in demand and credit turned this bubble into a classic crisis of overproduction. In 1979, Jimmy Carter imposed an embargo against the USSR, in response to the Soviet invasion of Afghanistan. This removed a significant portion of total demand for US farm production and caused a collapse in prices and profits. The resulting fall in support for Carter among US farmers, including the Farm Bureau, contributed to the election of Ronald Reagan, who ended the embargo in 1981. Meanwhile, the prime lending rate increased from 6.8% in 1976 to an all-time high of 21.5% in 1981. This increase in rates resulted in US farm debt doubling between 1978 and 1984.

The convergence of hits to credit and demand caused a crisis that most affected poorer and more debt-burdened farmers. Many small farms were driven out of existence in a wave of auctions and bankruptcies. The suicide rate among farmers also soared in this period, a phenomenon mirrored today in the aftermath of the 2008 crisis.

As an irrational, unplanned system, capitalism has booms and slumps built into it, and this also applies to agriculture. Each downturn drives out the smaller producers and concentrates wealth to a new degree—setting the stage for the next crisis. In September 2018, as Trump threatened to disrupt agricultural demand with his trade wars, the Federal Reserve announced its plan to steadily raise the prime interest rate above the rate of inflation for the first time since 2008, claiming the US economy is now healthy enough to withstand this. But the twin tightening on trade and borrowing is potentially setting the stage for the next agricultural crisis.

Suicide rates among poor farmers are hitting an all time high amidst yet another debt crisis.

American farmers tend to have relatively higher incomes and wealth compared to other small business owners. At the same time, the rate of poverty in rural areas is higher than in cities, and there are particular ills experienced by the poor in rural areas. Vast distances separate rural population centers, making it more difficult for the rural poor to access things like healthcare and public transit—not to mention jobs.

The US electoral system gives disproportionate electoral power to rural areas, particularly to wealthy people in rural areas who are the primary beneficiaries of US farm policy. The electoral significance of the wealthy in these regions has created a cohort of powerful representatives from both major parties, who wield significant influence by catering to the petty-bourgeois and bourgeois base in their districts. Between 2003 and 2005, 42.4% of total crop subsidies went to the congressional districts of members on the House Committee on Agriculture. Within these districts, the distribution of aid is additionally skewed: 58% of crop subsidies between 1995 and 2005 went to just 10% of recipients. Both the Democrats and Republicans are invested in continuing this regime. This raises the need for a party of the working class that represents, not major farm corporations, but the farm workers who actually produce our food, as well as small farm operators crushed by debt and dependence on finance and big agribusiness.

Agriculture and its crises play an outsized political and cultural role in the US, despite its relatively small contribution to the overall economy. Farms are a vital pillar of the system of class rule in the US, and the struggle to establish working-class power must address the question of agricultural production and labor. At the same time, accelerating climatic change lends greater urgency to the matter. In the medium term, climate change will likely require massive shifts in the world’s approach to agriculture, and the profit-driven system in place today has no way to address these shifts in a timely way.

Marxists oppose both capitalist free trade and protectionism. We fight nationalism with proletarian internationalism and solidarity. We fight for the nationalization of the key levers of the economy, including the major food and agribusinesses, to be integrated into a socialist plan of production, distribution, and exchange, in harmony with the environment. As for small agricultural producers, a workers’ government would offer cheap loans, advanced equipment, and guaranteed prices, and would give them plenty of time to decide for themselves how and when to integrate into the broader socialist planned economy.

Trump’s promise of new benefits for farmers is yet another attempt to address the symptoms of the crisis instead of the problem. The contradictions of agriculture, free trade, and the class rule of the capitalists will not be solved by tinkering around the edges of the system but by uprooting it and replacing it with a new one organized on a socialist basis.

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