UC Berkeley

This research explores the politics of modern commodity agriculture and the redistributive politics associated with it, focusing on Argentina and Brazil. Despite the magnitude and consequences of agricultural subsidies and taxation, their political origins are poorly understood. It is widely observed that wealthier countries tend to subsidize farmers while poorer countries tax them, and farmers in developed countries are credited as being skilled at lobbying. What is less clear is where that skill and political leverage originates.

Using both qualitative and quantitative evidence, the analysis finds that the key determinant of the level of taxation or subsidy of agriculture is the capacity of agricultural producers to form strong political organizations. While factors such as economic development can improve the prospects for rural organization by reducing collective action problems, farmers must also have incentives to invest in political action. Importantly, the structure of markets within the agricultural sector shapes these political investment incentives. When access to inputs for production, particularly land, is governed by markets, political power is less economically valuable, and actors will consequently invest less in politics. Additionally, when markets are more flexible, actors can diversify their investments and manage risk more easily. In contrast, political organization is a more worthwhile investment when allocation of productive inputs and risk management occurs outside of markets.

The cases of Argentina and Brazil, two countries that greatly benefited from the agricultural commodity boom of the 2000s, illustrate how market structures shape political incentives. In both countries, new rural market institutions emerged as the unintended consequences of mid-20th-Century regulations. These markets differed in critical ways in the degree to which they were conducive of rural political action. In Argentina, highly flexible markets for short-term land rental and agricultural services emerged. These new markets facilitated the adoption of technology and increasing the scale of production by reducing the need to sink capital into purchasing land and machinery. The flexible markets thus encouraged farmers to invest more heavily in economic options rather than political action. As a result, Argentina's rural sector steadily withdrew from politics over several decades, weakening their previously influential organizations and abstaining from electoral contests. When commodity prices rose and a populist government came into power in the 2000s, Argentine farmers were powerless to prevent the imposition of increasingly high export taxes on agricultural goods.

In Brazil, rural policies designed to pacify peasant mobilization and increase agricultural production without agrarian reform had the effect of destroying markets for land rental and making rural labor more costly. Large-scale, well-capitalized, landowning farmers came to dominate production, to the point that the state of Mato Grosso's 5,000 soybean farmers produced 7 percent of the global trade in the crop on farms that averaged more than 8 times larger than properties in the Corn Belt of the United States. Because flexible markets did not emerge in Brazil, these concentrated producers tended to have more capital sunk into their operations and were less able to manage production risks through markets. Political investment thus became a more valuable alternative: a means to diversify their portfolios. Consequently, during the 2000s, new, highly organized and well-funded farmers' associations formed, taking over political parties at the state level, promoting the election of ``rural entrepreneurs" to public office, and building a powerful national lobby. Redistribution between the countryside and the cities shifted to favor farmers, who became net recipients of subsidies.

The findings of this research illuminate several important areas of theoretical importance. First, they highlight the close connections between markets and politics. While many studies have focused on how politics creates and shapes markets and on how markets govern economic behavior and industrial organization, the ways that market structures affect political actions has received far less attention. Second, the analysis explores the evolution of redistributive politics as economies grow and new technologies are adopted. Economic development is a disruptive process, and while wealthy countries tend to share certain political commonalities, expanding wealth can lead to vastly different effects. Among many factors, how markets evolve as production develops has significant implications. Third, this research affirms that agricultural commodities can have powerful effects on political dynamics. Scholarship has long affirmed the historical relevance of agricultural exports for many developing countries, yet recent research has tended to focus on the political effects of natural resource endowments, such as oil, copper, and diamonds. This research shows how agricultural commodities can similarly shape political economy and regime dynamics.