A Different Kind of Urban-Rural Linkage

A March presentation on the Farm Bill by Adam Warthesen of the Minnesota Land Stewardship Project started with a pop quiz. Match the projected 10-year farm-program expenditure with its name. The options were as follows:

$771.6 billion A.  Conservation Support
$90.1 billion B.  Crop Insurance
$67.3 billion C.  Nutrition and Food Support
$65.7 billion D.  Commodity Program

When most Americans think about the Farm Bill, they don’t think about crop insurance.  However, the cost of crop insurance to taxpayers has more than doubled in the past decade.  Brian DeVore reports that today it is ($90.1 billion) second only to nutrition and food support programs ($771.6 billion).  The cost of commodity subsidies ($67.3 billion) and conservation support ($65.7 billion) come in a close third and fourth.

While most coverage of the crop insurance issue has focused on rural audiences, those of us living in cities should be concerned that the sources of our food security may be under increasing threat.  Anyone concerned about the social justice and public health implications of rising food prices, diminishing farm yields, climate change, and escalating land speculation should know about how the ever-growing cost of crop insurance for US taxpayers is working against our health and social equity goals.

A Short History of US Crop Insurance

The United States Department of Agriculture’s Risk Management Agency runs the federal crop insurance program.  Started in 1938, the program was the government’s response to the droughts and Dust Bowl of the 1930s.  Its goal was to protect the profitability of farming so that the country could support the population of farmers it needed to grow food and fiber.

The 1990s were a decade of big changes to the US’s federal crop insurance program.  Many of these changes set the stage for the problems farmers identify with the program today.  For example, the USDA stopped requiring that farmers have soil conservation practices in operation before they can collect insurance indemnities.  Also during this period the subsidized percentage of crop insurance premiums started its rise from 25% to today’s subsidy rate of nearly 60%.  This period saw the crop insurance innovation of coverage for revenue aside from crop yield.  Today, crop insurance for farm yield covers only 17% of US farmland.

By 2010, federally subsidized crop insurance covered 255 million acres of land, three-quarters of which were growing corn, cotton, soybeans, and wheat.  As a Congressional Research Service report on this issue explains, “insurance policies are sold and completely serviced through 16 approved private insurance companies.  The insurance companies’ losses are reinsured by USDA, and their administrative and operating costs are reimbursed by the federal government.”  In 2010, the USDA capped subsidies to companies issuing crop insurance at $1.3 billion.  Over 10 years this cap adds up to a $6 billion subsidy reduction, enough to make insurers balk at the proposal, but not enough to damage their profitability, or the profitability of the program.

United States Department of Agriculture

Agricultural Land Grabs

Insurance for farm revenues creates incentives for some of the largest farmers to leverage their size and personal yield histories into insured guarantees on revenue for new land that they rent or purchase.  Our current crop insurance policies allow this, regardless of the suitability of that land for farming.  This incentive to grow has led to a rural land grab where rental rates and land prices have snowballed.  One major effect of this skyrocketing in the cost of farmland is increased pressure for farm consolidation and dramatically increased financial barriers for new farmers.

Climate Change

Unsurprisingly, decoupling soil conservation from crop insurance has also led to a pattern of increases in both environmentally unsustainable farm practices and indemnity payouts resulting from unpredictable droughts and floods.  For example, farmers collected a record high $10 billion in such payments in 2011.  At the same time organic farmers who presumably use more environmentally sustainable food growing practices are currently required to pay a five-percent surcharge on crop insurance and reduced payments in the event of a crop failure.

Moral Hazards  

By decoupling soil conservation from crop insurance, the USDA has also created an agricultural moral hazard, a term used to describe a tendency to take undue risks because the costs are not borne by the party taking the risk.  Land that is not suitable for production can now be profitably farmed, even as a yield failure. Insurance guarantees income regardless of yield.  When the income insurance only costs the farmer 40% of the policy premium because taxpayers subsidize the rest, there are profit incentives to knowingly planting to fail.

The Bottom Line

When food and nutrition advocates think about the farm bill we are accustomed to focusing on increasing funding for nutrition and food support programs and decreasing funding for commodity subsidies.  In reality, the federal crop insurance programs costs significantly more than the commodity program and leads to many of the same problematic food system outcomes – land and business consolidation, support for corporate farming rather than small farmers, high prices for crops we consider food, and environmentally unsustainable farm practices.  The National Corn Growers Association reportedlyexpressed willingness to give up direct payments from commodity subsidies in the farm bill.  They can now hedge their bets on profit with crop insurance and stay profitable.  All while the federal government would appear to be responding to our calls for reduced corn subsidies.

This farm bill season provides both urban and rural taxpayers and eaters with an opportunity to ask elected officials harder questions about crop insurance.  Should taxpayers be subsidizing the insurance of farm profits, not farm yields?  Why should crop insurance policies be based on the historic productivity of the farmer and not the land? Why can’t we return to requiring that insured cropland be conservation compliant?  By raising these and similar questions, food advocates can help to create farm policies that better support the environment, health and democracy.

 

Kimberly Libman is a doctoral student in environmental psychology at City University of New York and a research fellow at Corporations and Health Watch.  

 

Image Credits:

1. formalfallacy via Flickr.

2. meironke via Flickr.

A New Deal for Public Health in Britain: Whose Responsibility is the Health of the Public?

The recently empowered coalition government in Britain has adopted a new and controversial approach to public health. In 2010, the secretary of state for health, Andrew Lansley, released a white paper declaring that “Responsibility Deals” would be used to promote health lifestyles and reduce the public health and financial impacts of chronic diseases. Lansley specifically states that the deals are “a Conservative response to challenges which we know can’t be solved by regulation and legislation alone. It’s a partnership between Government and business that balances proportionate regulation with corporate responsibility.” The policy approach raises the ongoing issue of deciding what role government should play when it comes to protecting public health.

Similarly it begs the question of what role, if any, representatives from food, alcohol, and tobacco corporations should have when it comes to writing health policy.

It just takes a little Nudge, or does it?

The approach is founded on an idea that Geof Rayner and Tim Lang of the Centre for Food Policy at City University in London argue is an extension of neoclassical economics, where rational consumers make smart choices, and in so doing support free and responsive markets. Nudge, as this approach is called, comes out of an eponymous book by Thaler and Sunstein. Positioned as an alternative to regulation and the “Nanny State,” Nudge argues that policy interventions like legislation, taxing, regulations, and bans are ineffective and costly for governments to implement and enforce. Instead, government should work with private industry on matters of health promotion and rely more on social marketing and industry-sponsored programs such as a bank sponsored “public” bike-rental scheme in London.

“Responsible” Dealings

The responsibility deal focused on diet and physical activity has three objects, or what it calls pillars. These are:

One: To enable, encourage and incentivize consumers to adopt a better diet and to increase their levels of physical activity as part of a positive decision to lead a healthier lifestyle.

Two: To enable and encourage people to drink sensibly and responsibly.

Three: To extend the scope and effectiveness of occupational health services through businesses, especially for small and medium-sized businesses, with an emphasis on maintaining a healthier lifestyle amongst the whole workforce and thereby reducing sickness and absence.

To date, roughly 400 corporations have signed on to, or pledged, promote these goals. In keeping with the theme of voluntary action and self-monitoring, each of these corporations has drafted and submitted its own pledge to the British Department of Health. In April of this year, each will also submit a self-assessment of their success meeting their goals. As an example of the type of commitments made, 40 of the “partners” as the corporations are referred to by the Department of Health, have agreed to start calorie labeling schemes of foods eaten out of the home. McDonalds is the largest retail outlet to sign on.  Others among the 40 corporations include Starbucks, Burger King, Pizza Hut, KFC, and several of the large supermarket chains. The Department of Health estimates that by 2012, 8000 food outlets in Britain will have calorie labels on their menus. While this is a move, perhaps nudge, in the right direction, it is a far cry from the scale of change likely needed to create real gains in public health. No aspect of this responsibility deal standardizes or mandates the size and/or placement of the calorie labels. No one other than the corporations themselves will be checking the accuracy of the calorie counts posted.

New York City’s experience provides a useful comparison. In New York, the calorie labeling regulation passed in 2007 applies to roughly 10 percent of the city’s 23,000 restaurants. The city’s legal battle with the food industry over the law shows that in a regulatory context with enforcement, details about the placement, accuracy, and size of calorie labels generate significant debate. For New York, the devil in these details of implementation was believed to be critical to the policy’s impact. Britain’s approach is to be hands-off on these issues.

Medical and Public Health Professionals Respond

Not surprisingly, responsibility deals raised more than eyebrows in the British medical and public health communities. Several of what would have been key partners in this collaborative approach to promoting health have refused to participate. This pushback from health advocates and professionals includes academics (like Lang and Tahyer), the British Medical Association, the British Association for the Study of the Liver, the British Liver Trust, Alcohol Concern, the Institute of Alcohol Studies, and the Royal College of Physicians. A consortium of NHS members, public health professionals, and concerned member of the public called Big Society NHS has critiqued the deals, stating that:

“The model of intervention promoted places government regulation as the last step. Once again shirking responsibility and leaving patients susceptible to corporate promotion of profits over health. In short these reforms neglect and dilute patient care, through the systematic fragmentation of the NHS, decrease in government responsibility and increase in privatisation.”

Other concerns of these constituent groups include:

  • The potential for government and private industry collusion behind closed doors on public health policy
  • History shows that private industry’s profit motive will prevent it from acting in ways that protect and promote health
  • That several of the resource allocating mechanisms of the reform will exacerbate, rather than reduce, health inequalities
  • The government white paper outlining the reform fails to include plans for monitoring the impacts of the policy
  • The government white paper outlining the reform fails to include plans for recourse or regulation if it turns out that Responsibility Deals don’t improve public health

What about US?

At the heart of the responsibility deal controversy is the very old public health issue of jurisdictions at all levels of government needing independent decision makers to make the sometime tough and almost always unpopular choices that elected and appointed officials can’t. Time will tell if the responsibility deals create the positive impacts the conservatives claim they will. Or, if this collaborative approach including corporations in writing public health policy will backfire in the ways its critics claim.

For this writer the more salient questions are: do we have time to wait? Is saving money in the short-term on enforcing regulation really worth the potential damage to health and its consequences on public spending in the long-term?

As a final cautionary note, it is worth noting that elements of this approach have already worked their way across the pond. The US’s voluntary salt reduction program is modeled on one that originated in Britain. Given the unique powers and protections afforded to corporations in the US, one should wonder how irresponsible it might be to adopt these kids of deals in this context. It may seem like an impossible move today, but with the Tea Party brewing and a contentious election season on the horizon, it is worth keeping an eye on the latest in conservative, neoliberal, health policy.

 

Image Credits:

1. Vissago via flickr.

2. Toban Black via flickr.

3. KR Colvin via flickr.