TCS Daily

40 Acres and a Check

By John Downen - June 11, 2003 12:00 AM

BOZEMAN, Mont. - The emptying of the Great Plains brings hardship to those holding on to a disappearing way of life. But it also brings opportunities for those who see the signs and adapt.

But, however well-intentioned, 13 U.S. senators are providing false hope. Through a serpents' nest of tax breaks, credits, debt forgiveness, loan guarantees, and federal handouts, the New Homestead Act (S. 602) would subsidize the repopulation of counties that have lost more than 10 percent of their population in the last 20 years.

Like ecosystems, economies evolve. Increased international competition, rising capital costs, and other factors are making small-scale agriculture in the Great Plains less viable. This has lead not only to consolidation - or abandonment - of agricultural lands, but also to an inexorable exodus of people seeking better opportunities.

U.S. Census Bureau data show a swath of out-migration of up to 40 percent over the last decade. Like a new Continental Divide, it runs from North Dakota and eastern Montana down through Texas. Except for brief pauses in the 1930s and '70s, the U.S. population has steadily become more urban since the first census in 1790. About 80 percent now live in metropolitan areas. This shift marks the country's evolution from an agricultural economy to an industrial and post-industrial one.

Ecologists no longer view "climax ecosystems" as the final stage in ecological succession, but rather as a temporary phase in a continuous process. Likewise, industries rise, fall, and are replaced. In the Midwest and Intermountain West, agriculture and resource extraction are waning sources of income. Replacing them are more human capital-intensive industries and the environmental amenities of wild lands.

This is the result of natural economic forces at work. Large family corporations and agribusinesses better manage the uncertain returns and rising capital costs of farming. As a result, many small farmers and ranchers are moving into niche markets (e.g., Predator Friendly lamb and wool, and Conservation Beef) or getting out altogether. Their children find better opportunities in the knowledge and service industries, generally in urban areas. A degree in finance gives higher yields than fertilizer.

In the wake of this out-migration a vast nature preserve is evolving in the region, a "Buffalo Commons." This is happening without government coercion.

However, the sponsors of the New Homestead Act, mainly from the Midwest, want social engineering. At best they are terribly misguided about how complex systems work. At worst they're attempting to impose a central plan for the "proper" population distribution. Ignoring or denying the dynamism of our society, they seek to revive a failed past.

Everywhere the history of central planning is a litany of failures. Why subject rural America to the same? People are leaving for an excellent reason: they face poor opportunities at home. Paying them to stay won't create jobs. In attempting to thwart natural economic evolution, the government will only prolong the pain of transition while creating new pathologies of dependence.

The agriculture sector is already highly subsidized and protected. Throwing more money at it will not arrest its decline. A December 2002 New York Times article reported that "the biggest economic collapse is happening in counties most tied to agriculture - in spite of the subsidies."

The rural areas that thrive have more than good soil, e.g., friendly communities, environmental amenities, and a well-educated workforce. The federal government can't provide these; and it can't know what each community needs. Places like Bozeman, Mont., show that small, rural towns can attract jobs and residents without active government intervention. (Many wish we weren't so successful.)

Government subsidies generally indicate a waste of resources. These subsidies are provided for political, not economic, reasons. They foster abuse and corruption.

The New Homestead Act would, among other things, establish a venture capital fund stocked with at least $250,000,000 of taxpayers' money per year for 10 years. Since those doling out the money are not accountable for the results of its use (and private investors are guaranteed to recoup 60 percent of any losses), there is little incentive to dispense it wisely. Waste and corruption are inevitable outcomes.

Our dynamic economy and mobile workforce are remarkably adept at adjusting to changing conditions. Yet the New Homestead Act would attempt to engineer away such progress.

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