Stop subsidies, switch to organic farming

Regenerative farming is now firmly established and is becoming more popular [GALLO/GETTY]

This is the second instalment of a three-part essay that explores how the United States stands at a historic turning point. The author argues that the economic engine that carried the nation out of World War II, to then outperform the Soviets in the Cold War, is incapable of meeting the challenge of the 21st century. While the US and other Western economies are in the throes of a rare and disruptive debt crisis, the global economy is in the midst of three additional challenges: rapid economic inclusion, ecological depletion and a resilience deficit. Though distinct, these crises are inseparable in practical terms, forming a singular strategic test facing the US.

Simply put, the post-Cold War international economic system is fundamentally unsustainable. Based on preliminary estimates, a pivot towards open-market sustainability will immediately deliver the certainty investors need to put labour and capital back to work in a productive economy. Built on the bedrock of demographic demand for a new American dream and a resource productivity revolution, it will put the nation on a path to achieve climate-stabilising carbon reductions and align the US market with rising global demand. Instead of the halting multilateralism of attempts to mitigate climate change, open-market sustainability provides an opportunity to enhance our security by leading the transition to a sustainable – and prosperous – global economy.

In this chapter, the author focuses on the need for switching to regenerative agriculture which represents significant gains to prosperity, well-being and sustainability. The next (and final) chapter will focus on a sustainable tax shift that would generate revenue for government operations from material, energy and natural resource efficiencies and reduce the percentage of revenue that comes from traditional sources. If you missed it, read part one here: Open-market sustainability for the US.

Washington, DC – At the core of open-market sustainability is the best-kept economic secret in the US: a deep source of pent-up private demand that, by demographic happenstance, is perfectly suited to power a new era of sustainable US prosperity.

US demographics, the built environment and economic strategy were all fused by the Cold War. The US was going to contain the Soviets so that we could ultimately defeat them in a contest of economic and political systems in which subsidised suburban growth competed with the politburo’s central planning. It worked.

The US citizen, secure in his or her future prospects, got married, bought a house and started having children. In the late 1970s and early 1980s, those children, the baby boom generation, started having children themselves. Today, those two generations are roughly equal in size, in the neighbourhood of 77-78 million people each, together making up half of the US population.

The preferences of these two groups have now pivoted decisively away from the monochrome subdivisions that pervade the US landscape. For the boomers, crossing the symbolic age of 65 means multi-bedroom, large-lot homes in the distant suburbs, which do not offer the lifestyle this generation wants or needs at this stage.

Large homes require too much maintenance and time; car-dependent suburbs become unlivable, as driving becomes more difficult or unsafe. With savings and retirement uncertain, boomers need to work longer than their parents. The retirement dreams of their predecessors, whether the sun-baked community in Florida or the golf course home in Hilton Head, are either unaffordable or undesirable.

Millennials, the generation born between 1982 and 2000, were raised in the sterile, disconnected suburbs and have had enough. Seventy-seven per cent of this younger generation says they will never go back. With diminished economic prospects, this generation feels it cannot afford to live in communities that require two and three cars to move the family around, which is fine, as they also do not aspire to become chained to the minivan for hours every day.

The peak of these two groups’ overlap in the home-buying market will be from 2014 to 2029. Millennials, starting their families, will be looking for starter houses. Boomers, looking to downsize from their larger single-family homes to something more manageable for a smaller household, will be looking for a similar product in similar places.

Right-sized homes

That demographic pattern is already being picked up in market surveys. In a consumer preference survey released in March 2011, the National Association of Realtors reports that 56 per cent of homebuyers want their next home purchase to have the attributes of smart growth. That is, they want right-sized homes in a broader range of housing types (single-family, townhouse, live-work, condo and apartment) and they want those homes in walkable, service-rich, transit-oriented, opportunity-dense neighbourhoods.

In percentage terms, this group is just under three times the number of returning veteran and their new spouses after World War II – more than eight times in absolute numbers. Backstopping that convergence is the US Census Bureau’s estimate that, by 2050, we will add another 130 million people to our nation, which translates roughly to 50 million new households.

Real estate accounts for more than 30 per cent of all asset classes and must be engaged to pull out of the deleveraging. Yet, despite the sizeable demand for smart growth, only two per cent of housing starts have the attributes of smart growth, and new homes are only one per cent of the residential real estate market. Federal subsidies are the source of the bottleneck, reflecting the long-past logic of Cold War survival.

Transportation dollars are required to fund highways, 80 per cent of whose cost is paid by the federal government. Fannie Mae and Freddie Mac, though more conservative after the crash of 2008, are still underwriting mortgage products that force buyers to drive farther and farther away from city centres to qualify for a home loan.

But the problem is not just with federal policy. Counties on the suburban fringe often see suburban development as the path to increased tax revenue, unaware that after the wave passes through they will be left with a heavy infrastructure burden and a thin tax base. Ironically, after subprime mortgages and high gas prices triggered the Great Recession, publicly traded homebuilders were able to go back to Wall Street investors with an argument that, even though home prices had gone down, agricultural land prices had dropped even further, increasing builders’ profit margin.

While this massive pool of pent-up private demand sits virtually untapped, Wall Street is resting on an equally large reservoir of liquidity that is looking for “certainty” before investment. Uncertainty comes in many forms, from licensing and regulatory requirements, to the price of carbon, to taxation and market demand ambiguity.

A decisive policy that sets a clear framework for investment can tap this pool of capital through a new era of right-sized mortgages, municipal bonds and equity investment in the businesses building the next American Dream. The prize is larger than any federal stimulus: the Federal Reserve and market research firms estimate that, between corporate cash and institutional investors’ money market funds, $3.6 trillion is waiting for improved conditions for long-term investment.

We already know this will work. In the early 1990s, as part of its strategy of constraining sprawl and keeping its urban core vital, Portland, Oregon, built a $100 million light-rail network. In the 11 years since the streetcar route was identified, real estate within two blocks of it has attracted more than $3.5 billion of private investment. The Greater Salt Lake City metropolitan region, a region that voted 67 per cent for McCain-Palin in 2008, is another good example.

The state and various municipal governments, the chamber of commerce and stakeholders from across the spectrum came together to figure out how the region was going to double in population while attracting outside investment without diminishing the quality of life. The region chose the most aggressive of the four scenarios they developed, minimising vehicle miles travelled, preserving farm and wild lands, and saving $5 billion in local government expenditures over 20 years.

Housing and transportation

Mandate regional growth blueprints

• Design the future: Mandate and fund regional growth blueprint efforts requiring stakeholders in metropolitan and micro-politan statistical areas to coordinate land use, housing, transportation, agriculture, energy, water, healthcare and education infrastructure planning processes across jurisdictions and agencies.
• Get it done: Blueprints must be complete in 18 months, updated every ten years.
• Make it work: Require metropolitan blueprints to reduce vehicle miles travelled by 50 per cent by 2050, micro-politan and rural areas by 35 per cent; and reduce energy transmission losses by 50 per cent by 2050.
• Total cost: $1.5 billion, with a 1:1 reduction in the mandated transportation bill. Net new cost: $0.

Fund the 21st century transportation network

• Go multimodal: Holding federal gas tax levels steady, unlock funding from the Eisenhower-era priority, highways, allowing federal dollars to support road, rail, bus, air, inland water, bicycle and pedestrian transportation projects.
• Focus on blueprint priorities: Federal transportation dollars support local priorities within the new regional blueprints.
  

  “Real estate accounts for more than 30 per cent of all asset classes and must be engaged to pull out of the deleveraging.”

• Reduce federal matching: Reduce federal matching funds from 80 per cent of major projects to 50 per cent, encouraging market discipline and protecting against “bridges to nowhere”.
• Score applications: Develop a transparent evaluation system to prioritise federal funding of regional blueprint priorities, privileging backbone infrastructure projects for entire regional areas that provide the best combination of mobility, efficiency and affordability.
• Total cost: $50 billion, with a 1:1 reduction in the surface transportation budget. Net new cost: $0.

Reset the private housing market

• End the bailout: Limit the cap on total federal “lifeline” support to Fannie Mae and Freddie Mac to $200 billion, of which $104 billion has already been spent. Treat any future lifeline support as ten-year.

Farming: From depletion to regenerative agriculture

“The nation behaves well if it treats the natural resources as assets which it must turn over to the next generation increased, and not impaired, in value.” (Theodore Roosevelt, 26th president of the United States)

The US cannot become sustainable, nor can we induce global sustainability, without addressing the way we farm here at home. Part of the coming challenge is rising global demand; the International Monetary Fund’s food price index has risen 220 per cent since 2000, as Asia’s economy creates more purchasing power seeking a more diverse diet.

As another three billion people enter the global middle class over the next 20 years, we are going to have to put as much of the planet’s arable land under cultivation as possible – and do so while restoring our ecosystem, not depleting it. That is going to require a different kind of farming revolution, forging a regenerative agricultural system that meets increasing global demand and provides good jobs, all while restoring our soils, our waterways and our atmosphere. Increasing global yield is still absolutely necessary, but no longer a sufficient metric of success.

We cannot make this change given the way farms in the US operate today. At present, the US uses six calories of hydrocarbon energy to produce one calorie of food energy, meaning that food prices are tied dangerously to oil prices. The water we use for irrigation and the fertilisers we use on the land are also unsustainable.

Total federal irrigation subsidies are approximately $22 billion, while the giant Ogallala Aquifer that irrigates $20 billion in agricultural products in the Great Plains is being drained at the rate of 18 Colorado Rivers each year – with recharge rates less than one-tenth of one per cent of withdrawals. Fertiliser-intensive agriculture has led to rapid soil depletion, while nitrogen-rich farm effluent is poisoning our waterways, choking off spawning grounds, estuaries and shellfisheries.

Depletion and waste on this scale indicate a major market failure. In this case, the failure is a function of policy: agricultural production in the US is incredibly subsidised and the costs of ecological depletion are external to the market. A Canadian agricultural industry report published in November 2010 estimates that the total value of direct and indirect federal agricultural subsidies amounted to $180 billion in 2009, or over half of total US farm revenue. This massive government intervention in the farming sector is in part a product of the disproportionate weight given to farming states in the US political system, specifically the electoral college and the Senate. According to Dan Glickman, former US agriculture secretary, the subsidies are “largely an income transfer programme”.

Ill-conceived subsidies

It is not just the ecosystem and markets that are affected by the subsidies. Ill-conceived subsidies are at the heart of the obesity problem in the US and are undermining the family farm, depleting rural and maritime ecosystems, increasing our carbon emissions and suppressing agricultural exports from developing nations.

The superiority of regenerative farming is now firmly established: organic agriculture outperforms and outearns conventional industrial farming. In September 2011, the Rodale Institute released the findings of its 30-year study of farming systems. Organic techniques beat conventional methods in every category, most importantly in productivity and in profit per acre. Controlling for premium pricing (the Whole Foods effect), organic production brought in three times as much per acre per year.

Equally important, organic production produced slightly better yields than standard industrial techniques. Organic farming is also regenerative, rebuilding soils and retaining 15-20 per cent more water, in turn improving drought resistance. These regenerative techniques consume 45 per cent less energy and emit 29 per cent less carbon than conventional methods.

Combined with the successful development of full-scale biochar, the agricultural sector could sequester up to 20 per cent of the carbon that flows through the farming cycle. Biochar, similar to charcoal, is produced when agricultural waste is heated in a low-oxygen environment, locking the carbon in the waste into a stable form for centuries.

In addition to sequestration, biochar rebuilds soil volume, nutrient composition and water retention. Biochar production, however, also produces syngas, a biofuel, up to ten times more efficiently than corn ethanol production per kilojoule of net energy.

A shift from a policy of federally subsidised farmland depletion to regenerative agriculture would allow the farming families of the US to lead a prosperous life, caring for the land. Farmers would once again be stewards of the soil, rebuilding fertility, sequestering carbon, and protecting our waterways, all while feeding people wholesome food. Indeed, such a program would likely bring more US farmers back to the land as less profitable, less efficient, capital-intensive industrial agriculture is priced out of the market.

Regenerative agriculture

Stop the addiction

• End perverse subsidies: Conclude subsidy programmes for irrigation ($22 billion), the Commodity Credit Corporation ($24 billion), export subsidies ($26 billion), direct producer payments ($10 billion) and the biomass energy tax incentive ($5 billion). Total cost: $0, with $87 billion in savings.
• Accelerate adoption: Create a market-friendly, budget-neutral fee/bate (penalty/reward) programme to reduce and sequester carbon emissions, to reduce water usage intensity and to eliminate nutrient waste and leakage. Like the Japanese “Top-Runner” programme, highest performing farms set the standard that all producers need to hit within five years. Businesses that outperform the standard get a rebate; those underperforming incur a fee. Total cost: $0.

Invest in the future

• Finance farm conversion: With the first $60 billion in subsidy savings, directly support the conversion of US farms from industrial to regenerative systems. Total cost: $60 billion.
• Innovate and test rural infrastructure designs: The US rural infrastructure is as degraded as the rest of the nation. Smart grids, high-speed freight rail, bulk river transport, and inland and coastal port updates are all necessary. Design transport networks to supply regional needs locally and then export surplus production. Total cost: $10 billion.
• Accelerate renewables: End taxation of grid-connected solar, wind, geothermal, microhydro and waste-energy cogeneration projects to diversify farm income. Total cost: $0.
• Educate innovators: Increase federal funding to land-grant universities to localise sustainable agriculture production methods and to US Department of Agriculture agricultural extension programmes to educate growers about sustainable farming practices tailored to their growing region. Total cost: $10 billion.
• Finance the biochar revolution: Expand and accelerate funding for biochar research and full-scale production. Total cost: $7 billion.

Patrick Doherty is deputy director of the National Security Studies Programme and director of the Smart Strategy Initiative at the New America Foundation.

The third and final instalment of tis essay will be published here on Al Jazeera Online later this week.

A version of this article was first published on the Solutions Journal.