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Source link: http://archive.mises.org/6486/milk-is-the-future/

Milk is the Future!

April 9, 2007 by

An interesting case of the failure of micro-central planning comes from Shaliuhe, China, as reported in the Economist. This rural area has the misfortune of being ruled by local bureaucrats who believe they know more than the price system, and so picked a sure investment for the locals: cows. They looked West and saw Beijing with its rising demand for milk products and figured that here was the key to the future.

So local officials started a propaganda campaign: “Good cows, good grass and good feed produce good milk.” There were subsidies and loans and all sorts of promises, and so people took the bait, went into debt, bought cows, and made the milk. The result: collapsing milk prices and no profits.

That set in motion a new campaign to get people to drink more milk. Apparently: “To the industry’s delight, the prime minister, Wen Jiabao, visited a dairy farm last year and said his dream was that all Chinese drink half a litre of milk a day, especially schoolchildren. In Moscow this week Hu Jintao, China’s president, encouraged Russians to buy more Chinese milk.”

It is very easy to scoff at goofy foreign attempts at central planning but the same errors have characterized US economic policy for decades. Ask any local officials what the most profitable economic opportunities are and few resist. Most local governments have economic development teams that seek to assist this industry or punish that one. On a national level, US officials have been darn-sure for more than half a century that the future of America is bound up with ever more professional scientists, for example.

Just once you would like to hear some appointed or elected official, when presented with question of what are the best and profitable investment for the community, answer as follows: “Heck if I know. The market is the system a free people use to determine the course of economic development.”

{ 6 comments }

Michael A. Clem April 9, 2007 at 11:15 am

The market is the system a free people use to determine the course of economic development.
Great stuff. The market is the process not only for getting goods and services to people, but also for determining what goods and services people need and want to be delivered. If investors have a hard time predicting the future, why should we expect public officials to be better at it, except perhaps in cases where they “stack the deck” with their regulations and restrictions?

Niels van der Linden April 9, 2007 at 12:03 pm

Jeffrey; your last paragraph is not what power is about. The point of establishing power over people is to exercise power over them.

When you want to help people you enter the market. The idea that people who do not enter the market but instead enter politics, and expect from them that they should do good (is that even possible with power?), is a dangerous fantasy.

AJ April 9, 2007 at 1:08 pm

Well, clearly the solution here is to establish a price floor on milk. A government price subsidy would also completely solve the problem. Or how about creating an entire new industry — milkonal?

Henry Miller April 9, 2007 at 9:57 pm

This ignores the fact that only those of European decent (and not even all of them) are able to drink milk. Most Chinese are allergic (lactose intolerant) to milk, and cannot safely drink milk.

So no the Chinese government is not only pushing bad economic policy, they are pushing it to the detriment of the people’s health.

Nat April 10, 2007 at 9:30 am

Henry Miller said:

“This ignores the fact that only those of European decent (and not even all of them) are able to drink milk. Most Chinese are allergic (lactose intolerant) to milk, and cannot safely drink milk.”

This “fact” of yours is pure nonsense. My daughter drinks about a quart of milk per day. The only side effect has been strong, healthy teeth and bones.

And by the way, she has gone from being in the 3rd percentile in height to the 75th percentile after leaving China.

Narsi V April 10, 2007 at 11:49 am

And did you know that the largest milk consuming nation is India. Not sure if that qualifies for European descent but step into South or East Asia. You will get a different perspective on life.

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