The following is a guest piece by Stephen DeMaura, President of Americans for Job Security, a national conservative issue advocacy organization. For more than 10 years AJS has advocated for pro-growth, pro-jobs public policy to strengthen the American economy. -ed.
Make Room in the Market, Monsanto Monopoly
Thereâ€™s a battle in agriculture that deserves a greater focus:Â The Seed Trait Wars.
What our families, our nation and the world will eat in the future depends in large part on the future of a robust, competitive biotech seed sector.Â Farmers and independent seed companies will need seeds with the genetic traits to deliver higher yields from the same land no matter the conditions.Â To do that weâ€™ll need more competition.
Itâ€™s competition that drives innovation, better prices, and more choices, and competition that gives farmers the right seeds to grow what they need, where they need to grow it.
WORLDWIDE NEED IS MOUNTING
The world will need 70 percent more food in 2050 than it does today, according to the UN. Â Â Farmers will need the best seeds to grow the crops that will feed the increasing number of people that will populate this planet.Â And theyâ€™ll need seeds that are genetically engineered with traits to account for their unique, geographic region and needs. COMPETITION CRITICAL
Weâ€™re at a critical juncture for want of competition.Â For example, Monsanto controls nearly 100 percent of the soybean seed trait market and about 80 percent of the corn seed trait market, as shown here. The company is using anticompetitive tactics to assert its grip as a single supplier, cement its monopoly, and block choice for farmers.
The primary tactic in Monsantoâ€™s playbook is something weâ€™re used to seeing in the pharmaceutical industry.Â Itâ€™s called patent extending.Â Prolonging the life of a patent by introducing a â€œnewâ€ product that is essentially the same as the one with the expiring patent.Â Monsantoâ€™s Roundup ReadyÂ® patent in corn and soybeans ends in 2014.Â Its new Roundup Ready 2 YieldÂ® technology is essentially the same as the first generation product.Â Read what the American Antitrust Institute thinks of the state of play in the biotech seed sector here.
The problem is that Monsanto wants to have its cake and eat it, too. Have the new patent and restrict the availability of the old one as its patent nears expiration.Â With generic competition, new seeds could be brought to market in 2015 and innovationÂ would be gated only by the bounds of creativity, not bottlenecked by monopoly.
MORE MONSANTO MARKET MAYHEM
- Preventing farmers from creating and choosing the seeds that would work best for them
- Charging monopoly prices (e.g, in 2009, announcing a 42 percent price increase for a product [RR2YÂ® in soybeans] that demonstrably provided no significant quality improvement)
FEEDING THE FUTURE
If Americaâ€™s farmers and the worldâ€™s farmers are going to produce the amount and variety of affordable food weâ€™ll all need, farmers will need choice and innovation that comes with full and fair competition.
When Senator Levin says â€œGoldman made a lot of money by betting against the mortgage marketâ€ what do we think he might have meant? Knowing some of the political philosophy of the esteemed senator from Michigan, it is obvious that his inference was that Goldman was acting in a fashion that was either illegal or immoral. How could any American institution bet against motherhood, apple pie or the American dream of universal home ownership? And certainly the notion of â€making a lot of moneyâ€ is of dubious quality on its face. The Senator is literally screaming â€œThese people are the enemy of the state, and they need to be leashed, or chained, or imprisoned, or torturedâ€¦all for the good of the system of the people.â€
It is always amusing when a single statement contains such a large number of fallacies. Let us count the ways.
First, Goldman was acting in their role as an investment broker. Everything they do is essentially either a bet for or against somethingâ€¦or the facilitating of someone else doing the same thing. More technically, they are simply acting as brokers, and not as agents. Agents represent a buyer or seller. Brokers facilitate the transaction. This is the â€œmarket mechanismâ€ and it is what guides the whole system of the effective allocation of resources. It is fundamental to our material progress. As significantly, if people would have actually listened to Goldman, the whole mortgage disaster might have been avoided. Starting in 2004 Goldman was very publicly saying that the US housing market was overpriced and that we were headed for real trouble. Unfortunately, too few actually listened to them, including Senator Levin. In the case of the SEC-driven synthetic CDO case, Goldman was actually not making a bet against the mortgage marketâ€¦an investor was. But even if they were, it was completely their right to do so.
â€œBut the disclosure wasnâ€™t adequateâ€¦â€ Please. If you hear anyone say this just say â€œstop,â€ and remember that these things were bought (not sold) by some of the most sophisticated investors the world has ever seen. These buyers were high-powered investors looking for levels of interest unavailable in our low-interest world, and they got torched. Anyone who uses the word â€œdisclosureâ€ in this argument is either very poorly educated, or more likely concealing a very ugly hidden agenda. Funny, have you heard anything from the actual investors who lost all the money? Most of the money that was lost in the mortgage meltdown was not even held by the banks. Unlike the power-mongering Senator Levin however, they all know and accept the penalty for the sin of their ill-fated and over-reaching greed.
Secondly, and contrary to Mr. Levinâ€™s fear of profit, the world has proven over and over again that without the opportunity for â€œprofitâ€ the world tends towards universal impoverishment. We should very quickly notice that profit is not a word to be used exclusively with respect to corporations; it is a universally human word. All of us require â€œprofitsâ€ as a source of motivation. Mr. Levin demonizes corporate profits, but fails to recognize the evil of â€œgovernment profits,â€ which are the desired fruits of his labors. In the case of government, the profits take the form of the shifting of funds from individuals and corporations into the pockets of government. Profits, thus defined, always flow out of a system where productivity is advancing. It has to. The only question is who gets them. Mr. Levin has decided that they should flow to him and his kind, as opposed to those with the brains and drive to actually create something of real value. Profit is virtuous. The conscription of profits by the government is the true evil. This is particularly evident in the case where the â€œdisclosureâ€ of the intentions of the government (think Mr. Levin) is what is so entirely deceptive and completely lacking.
Lastly, Mr. Levin effectively is saying â€œAnd what we need is a really, really, really big solution to this really, really, really big problem.â€ What we have in the case of the mortgage crisis is actually a really limited problem with a very large set of consequences. The failure that we experienced was a classic simultaneous failure of the banking and insurance systems resulting from too little capital required to support the levels of risks being taken. This is hardly a new problem. The current financial services bill, like the health care bill, is just an opportunistic ruse that only tangentially relates to the real problems that we face. All we need to fix the problems with mortgage-backed securities and their â€œderivativesâ€ are a set of rules around the capital needed to support both their issuance and their holding. End of story. Mr. Levin actually knows this. And that is the real problemâ€¦and a crying shame.
Sophisticated systems like ours create â€œsophisticated solutionsâ€ to create take-overs by the government that are accepted by â€œWe the people.â€ The financial services bill is sophisticated only its complexity, and has nothing to do with the problems we really face. And herein we see the real evil. Goldman is not our problem. Levin is.