pátek 23. května 2014

Home Farm as Way to Freedom and Middle Finger to Minister of Finance

First of all I am sorry for the sensationalist title but I could not come up with anything better to make you click. You won't regret.

Still you may come to a conclusion that there is something about the food industry and today model of food production is nothing else but magnified debt slavery.

The production chain can be visualized as a food's journey from primary ingredient through various transformation to your table.  It can be seen in the picture below depicting the transformation of sunflower seed.

At the beginning the farmer buys seeds that represent his entry costs. Grown sunflower is then sold for more which creates additional value of the product and subsequently his profit. Another company buys grown sunflowers – their entry costs include the additional value and all entry costs of the first farmer. Pressing and packaging creates another additional value for the second company. The product is then sent further the production cycle with all the costs that were accumulated in the previous transformations.

This process can be explained using an economical theory known as comparative advantage. In the past eras everybody was creating everything by himself until somebody figured that one person is better at one thing while the other can do other thing better. That led to the creation of exchange trade which allowed people to create values faster and effectively while enriching all the participants. This information is really valuable. We should not forget that we do our jobs because of this exchange trade.

We offer our services in exchange for money that are later exchanged for products and other services. Do not forget that this exchange is done primarily for a certain effect. We are supposed to generate bigger value than the value we will gain by personal production. If you monitor all the affairs with cheated food you probably ask yourself whether the value you get correspond with the price. After all we pay much more than we should and it is not fault of the distribution's margins only.

How come that we buy overpriced garbage instead of the best quality food for minimum prices? The long production cycle is at fault as it accumulates “toxic” costs (this term I define as cost that is payed for by consumer although it does not bear any value to him). Take for an example the hamburger in the picture below. I present only 5 transformations between the primary ingredient and final consumption to simplify. The reality is in fact way more terrifying. For example the production of a tractor begins tens of transformations earlier before it can even plough a field.

The tractor itself is an excellent example of the effective exchange. The agriculturist owns a tractor and can plough a hectare faster than you would repot a plant. This makes an obvious decision who should work in the office and who should plough. Where is that scary part? Lets assume for a moment that all the subjects of the chain are in the business on debt which is the reality of today – they have built factory using a loan, they have leased the tractor or a company car. The problem lies in this way of acquisition. Banks do not lend money for nothing, they are entitled to a fee.

The entry cost at every point of the transformation than does contain the additional value plus the “toxic” costs in form of the bank's interest. Every following piece of that chain is obliged to pay for the toxic cost and finally there you are at the end of that chain.

 The very same situation stands for the state's fees. Every part of the chain pays taxes that must be funded from the generated value. Therefore the tax burden is accumulated throughout the whole production chain towards your wallet (same way as the bank's interests). Although the only thing you see is the VAT 21%, the reality becomes more terrifying the longer the chain is plus the 21%. 

The Czech republic's rarity is that one man collects taxes, additional value of the production chain and subsidies for the agriculture, all of that because of electing Andrej Babiš. The subsidies are about 35 billions CZK per year while Agrofert gets approximately 10 % every year. A 4 member household pays 12 000 CZK a year in taxes from food which covers the subsidies for the agriculture. There is only one way out – shorten the process between you and the place of origin of food. Shorten it to the minimum and ideally squeeze it into your garden.

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