Note: This is an unfair comparison. A more meaningful comparison should be between owners of fertile farmland vs. car manufacturers, and not relatively powerless car mechanics.
I. Producer Vs. Service Provider
It is important to distinguish that owners of fertile farmland are producers. On the other hand, automobile mechanics are service providers. Therefore, the two categories have two different economic purposes. Agriculture can be exported, while a service, once consumed, has no further utility.
II. ~70% of GDP Based on the Service Industry, But Reactive to Demand
It is also key to be aware that in most countries, the service industry is the source of roughly 70% or more of GDP. In 2021, the U.S. service sector contributed 77.6% of GDP, while the agricultural sector contributed 0.96% – less than 1% – of GDP (Statista Research Department, 2023).
However, to consider the contribution of the service industry as more important than the production of agriculture is short-sighted. The service industry is prone to demand cutbacks (Johnston, 2019) which can result from a decline in wages, loss of major industries, or can be diluted by the entry of substitutes.
III. Traded Cluster Vs. Local Cluster Industries
When consumed in the same location where it is grown, agricultural crops can be considered a local cluster industry. However, when shipped to a different city/county/state/country, it becomes a traded (export) cluster commodity which compounds in value and utility. In 2015, the production value of Ventura County farmland was $19,330 per acre. With food processing, an added $835,000 of value per acre was created (Applied Development Economics & Hatamiya Group, 2015). Processed food revenue adds ~43X in value more than perishable crop revenue. Furthermore, processed food (canned, frozen, dried) can be stored for longer periods ensuring an extended ROI, for both consumer and producer, that raw, unprocessed food cannot match.
IV. Food is a Key to Survivability, Car Repair is Not
Without food, the body starts to use its own tissue as fuel. People who have voluntarily stopped eating to participate in hunger strikes have died after 45-61 days (“How long can you go without food? Survival, effects, and more,” n.d.).
Food has no substitute. We either eat, or we die.
On the other hand, a car repair, whether for personal or business use, may be key to profitability and comfort, but not so much to survivability. Car repair has many substitutes. We have can substitute a car repair with renting, leasing, or buying a different vehicle. We can ask a friend for a ride, or we can use Uber/Lyft/Taxi. If we choose to, we can walk, hitchhike, ride a bike, or stay home.
V. Agriculture’s Technology Spillovers Vs. Automotive Mechanics as Technology Recipients Vs. Externalities
Innovation in agriculture has benefits beyond the farm, called technology spillover (Mankiw, 2018, p. 194). In addition to higher productivity, with technology advancements, farms use less water, fertilizer, and pesticides which, in combination, keeps food prices down and protects the ecosystem (“Agriculture technology, n.d.). A farm’s negative externality (Mankiw, 2018, p. 192) in the form of contamination, estimated to be between $80 and $200B within the meat industry alone (Olafsson, 2023), and depletion of natural resources is contrasted by the positive externalities, one of which, is the continuation of life itself. On the other hand, a car mechanic is the recipient of technology spillover. The mechanic does not create new procedures, nor invent new automotive materials. He/she must follow repair guidelines dictated by the manufacturer and cannot deviate from established procedures.
VI. Regulation and Corrective Taxes (Mankiw, 2018, pp. 195-197)
California regulates the use of pesticides, evaluate products before then can we sold, conduct surveillance and sampling, set standards to protect worker and public safety, and provide grants to increase outreach and awareness. At the same time, federal law mandates that no lower-level entity can pass a law that allows action that would violate the higher-level law (California Department of Pesticide Regulation, 2017). Furthermore, countries can use market-based corrective taxes to reduce the agriculture industry’s negative externalities through the following: 1) Energy Taxes; 2) Transport Taxes; 3) Pollution Taxes; and 4) Resource Taxes, such as water.
VII. The Power of Agricultural and Car Manufacturing Lobbyists
The federal government spends more than $30B a year on farm subsidies which can take the form of the following: 1) insurance premiums ($8B); 2) agricultural risk coverage, up to $6B; 3) price loss coverage, up to $5B; 4) conservation programs, $5B; 5) ad hoc and disaster aid – $23B in price disputes, $31B Covid response, $17B in conservation aid); and other support, $2B (Edwards, 2023).
In 2022, the agricultural lobby spent $165.8M to influence policies (Statista Research Department, 2022). Additionally, states such as California have gave a total of $16.3B in subsidies between 1995-2021, for an annual average of $453.7M in aid. In contrast, the auto industry spent tens of millions of dollars in lobbying against independent car repair companies to ensure that manufacturers, not car repairers control the ability to fix cars well into the future (Gault, 2020).
VIII. Conclusion
Government decisions are influenced by the power of lobbyists. This is apparent in the power of the agricultural lobby, as well the auto manufacturer lobby that is working to limit the repair capabilities of independent car repair shops.
More importantly, agriculture is a key element of life, is without a substitute, and will therefore attract resources to sustain it. Car repair has many substitutes, and the mechanic has zero political power against industry lobbyists.
References
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