This article demonstrates some of the negatives of having the government too involved in a market. When the government controls prices, they do not always reflect the prices that would result if markets were allowed to act freely. This is why the farmers can get more with private companies. This also shows that governments are not perfect for making economic decisions. Many people believe that having government control can lead to better economic outcomes such as efficiency. This article demonstrates that bringing in a private company led to more efficient farming. For example, farms selected for McDonald's use drip irrigation, which reduces the soil nutrients that are lost using the old method.
Monday, March 15, 2010
Green Shoots
This article discusses how private investment is playing a larger role in India's agriculture sector. For years, the the national government has been the driving force in all aspects of agriculture. The government would subsidize food, fertilizer, and fuel, but this has stagnated as prices have rose. Farmers would also sell their goods in price regulated markets run by the government. This has changed as private companies have come in and have taken over for the government, offering farmers higher prices than they would get in the government markets and helping with production. The article highlights McDonald's, who has spent years setting up supply chains for items like potatoes and chicken. India is a changing to accept new, westernized items and losing touch with many of their traditional ways.
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This is not too surprising because as the economy gets better and more people have better living conditions, they will start to invest more. And if government is seen as potentially too involved there will be a rally around less government in the economy.
I found this article interesting because I did not know the fact that McDonald’s supplies of fries comes from India. $0.14 for a kilogram of potatoes does not seem like a lot, but I bet it adds up. Especially with 5 acres of land to work with (2,000 acres of potato fields in Gujarat, cultivated by 400 farmers under contract with McCain Foods). I see that they have tractors (in the picture) and they use drip irrigation to help them grow potatoes, but I wonder what other innovations they use to help the potatoes grow to their proper size. I also wonder how many times a year farmers can grow a round of potato crops i.e. reuse the acre to grow another whole supply of potatoes to maximize their income and to meet the demand.
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