poor farmers and price..

Well this morning, digging up to one of my favorite blog, founding interesting article,Oke then, some questions revealed, whether rising price of rice would hurt the farmers or not?, well that's an old story i have had in the past, and really, till now, i'm still wondering why would that (ever) happened anyway.

The Quarrel between works of economist in development economics, in a certain manner would however change a cross time. My guess is the man, from whom kompas has quoted his words in this article is an old fashioned (-outdated-) one -if I say he to be an economist though.

What he’s arguing is a nowadays still being such a controversy among development economics, is it rising price of rice would make farmers better off?, or weather farmers will increase their production as a result of price effect?, would the income-marshallian effect would eliminate slutsky substitution effect ? Well I would say, that depends, depend on where do you look, what do you seek, and when.

You see, that’s the problem being Political economist, you’ll never be, or consider to be neutral, though I should say Economics were never been neutral anyway, but policy must be neutral, neutral with what you keep in your tiny head, cause your head could not keep up with all complexity in this growing market economies. Neither if you are market fundamentalist, nor I should say Structuralist.

That’s why I’m completely disagree with people consider themselves as an economist, development economist, talking to the news, about policy, without solid facts, they are nothing but politician need some vote for another election campaign success.What these guys were telling the news is that Farmers are often abused by the global market, and therefore we need to accelerate their income by keep the price (of rise) rising, well guys reveillez-vous … have you heard anything with such a complex problem with agricultural households? There is a problem called Separable problem, agricultural household is facing two intertwined problem in the same time, therefore their profit maximizing condition were constrained in a non-recursive way, and instead simultaneity occurred.
Even when price is rising up to the sky, farmers will surprisingly might reduce their production, and therefore cause a higher gap of income, cause the price effect is not only the rice, it multiplies a lot, through the other consumption goods rising as well.

So when will farmers will have a greater profit, and becoming rich?, frankly I don’t really know, what the answer for this, anyone has a clue? I’ve been thinking about this since I was studying Introduction to Development Economics, well I suppose that farmers will get better off by increasing their production, not by raising their price, because their welfare is endogen to the price.

Nevertheless some research as Benjamin(1992), Pitt and Rozenweig(1987) has proven that there is no such things like separability condition in Indonesia, well I think they have overrated our country, first of all, their research is only conducted in Java region, could not aggregate their result though, What happen if this separable thing were concentrated in some areas without adequate source of water, with pathetic quality of soil? What if Jakarta is so polluted, then what happened in Jakarta, would be totally different with what happened in Papua for instance. Secondly, their stories were way out of our time, it’s been almost 20 years now, and were facing a lot of up and downs in our economy. Thirdly, these researches were concentrated in labor market imperfect market, in a general term. Off course there should be another way in having another conclusion totally way around.

Another thing to look more precise is that often, the cause of separable is complex, it might comes from any different kind of market imperfection, and even the source might come from one market that is totally perfect ,why? Well because this one single market that is ironically perfect has caused some other market imperfect.-this is inspired by some of easterly critics of multi tasking of MDG-

Looking to the facts on the field, people has a large constrained of collateral, thus access in credit, Farmers have a large barriers of trade because no easy access to the market, then the transport cost is high, people in the mountains were so isolated that their cultivated their land on and on without sufficient fertilizers, there is too many imperfection against the farmers, and I agree that these guys need help. But saying that rising prices of basic needs is a fair deal for consequences of oil price shock, is confusing and misleading.

Instead of using our budget for subsidizing rice, we should increase the ability of trade and access on information, by giving them decent infrastructure, friendly bureaucracy, cutting some hands in the bureaucracy in export and import for example, do you know that rice produced in Thailand is far more “pulen” and More tasty, and it smell so good, that people would prefer buying it than other cheap rice. Here, thousand miles from Thailand, we eat Thailand product, and we pay in euro, and no indo-rice product made it to come here. Anyway how many Indonesian people, having opportunity to go abroad, who consume Indonesian rice, if they already had a chance to have Thailand rice? not many I guess, with a small disparity of price I’d prefer to let go my nationalism in rice, though.

You may argue that they are dumping their products, I would say, if they do that, why don’t we do the same thing? We import rice from Thailand, which is relatively cheaper, and then we export, say to France, all of our commodity, or may be even exported it to Thailand, in the end, the price would converge, and the only thing that that we could use in comparing the two is their quality, that is our base line, and In the end, no one will buy our rice, since we’re consuming the same Thailand rice.

So the bottom line is, the problem is not what Thailand has did with their price, but also why they could make such quality well known to the world. Another example is another close neighbor of ours, Vietnam, they Exported many kinds of things, small agricultural things, like chilies, spinach, etc, noodles, fisheries, fast food-kind of things, that were really fancy in this country. As a result, their price goes up, with a single addition in their package, a usual package of frozen “tongkol” mixed up with ingredients, will change to a well prepared Vietnam gourmand, with a little help of Microwaves, and so is fast food, we could get a tasty Chinese foods by buying all the ingredients available here.

A strange thing here is Indofood, and KOKITA stuff were easily found here, but no Indonesian imported it, it licensed to some Indian company, in contrast, Chinese supermarket “tang frere” were amazingly famous, and we can find all asian taste ingredients there, even Indonesian’s sambel oelek, what I’m going to say about this is that,global market were not so racial to the agricultural goods, the thing is you to improve your quality, your package, your additional values, and yet the most important increase your market potential. That’s where Chinese success came from, they have already ruled the world, even before Chinese open up their market. That’s why we always find Chinese restaurant every where, Chinese banks in every corners of the street of Paris.

What's I’m saying is, if you want your farmers to be rich, stop them of being a farmer and a farmer only, and becoming a farmer and entrepreneur at once, farmers in Indonesia were so characterized with lack of education, and information, they lack of source of money, but they need education and information the most,that is the information to reveal what is the real meaning of globalization, what is to have freedom to choose. And how they could sell their product, off course we have no means to give such policy like the common agricultural policy in Europe, and certainly we could not let the farmers hurt by the prices.

But still do not give up hope, we could make it, as long we stop complaining, and stop listening to politician, pretending as an economist.


Berly said...

Very deep and top notch analysis!

(one more sentence to explain separable problem and another about how farmer are both producer/consumer would be needed though to asisst non econ grad student readers)

Publish jg di kaFE depok donk...

sayasaja said...

Salam kenal,
Setuju dengan pikiran dan analisis Mas Rajawali. Tetapi sepertinya tidak banyak orang muda yang punya pendidikan tinggi dan mengerti, seperti Mas Rajawali, yang mau mendidik petani kita untuk melakukan itu.
Berapa orang sih sarjana ekonomi dan sarjana eonomi pertanian yang mau pulang kampung terus membangun sektor pertanian? Mereka lebih aman jadi pengamat, jadi dosen, jadi ekonom di bank asing, buat lembaga kajian (walaupun tidak ada yang menindaklanjuti hasil kajian mereka dilapangan).
Ada yang berminat membangun pertanian?

Kalo kita kembali ke masa lalu. Mestinya sektor pertanian bisa menjadi unggulan Indonesia. Tapi para pengambil kebijakan tidak ada yang mau melakukan itu. "Widjojonomics" tidak. "Habibienomics" jg tidak. Pemerintahan SBY-Kalla? sama saja...
Btw, analisis yang bagus.

Fika Fawzia said...

lebih banyak petani yg ga punya tanah, makanya meskipun produksi meningkat (bukan harga dinaikkan yah) mereka tidak bisa mendapatkan hasil yang maksimal...salah satu profesor di Seattle University (kalau tidak salah) pada akhirnya membuat gerakan "land for the poor", dan cukup membuat perubahan juga...daripada analis politik ekonomi yang akhirnya cuma menganalisa saja...

good article, tapi kalau bukan anak ekonomi susah dicerna kali ya.. :)

Rajawali Muda said...

sorry for that, ini nulisnya sambil emosi ;-)

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