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Reactions in the member states to the appearance of Mad Cow were varied but swift

These challenges created an opportunity for Fischer to propose and advocate major reforms. They also informed the content of the proposed reforms. WTO pressures facilitated the consideration of policies that made the CAP less trade distorting. Enlargement allowed for deliberations over policies that would improve the financial sustainability of the CAP in the expanding Union. Concerns related to food safety and perceived public dissatisfaction allowed policies to be considered that increased environmental and animal welfare standards and that improved the equity of existing programs. Though these pressures were critical, the MTR was not launched in response to them. Rather, a provision requiring an MTR had been included in Agenda 2000 at Fischler’s insistence. Fischler had been frustrated by the tepid Agenda 2000 agreement and wanted another chance to enact meaningful reform. The MTR was a concession to Fischler in return for Chirac’s last minute revisions to Agenda 2000 at the 1999 Berlin Summit27. The purpose of the MTR was to assess the status of the implementation of Agenda 2000 and to offer improvements, if necessary . While Fischler hoped that the MTR would be his avenue for more far-reaching reform, he was careful to only refer to it as a review, and not a reform . Most member states assumed that the MTR would be merely a review and that no substantial changes would result. Still, pressure was building to overhaul the CAP, starting with the recently launched Doha Development Round. Fischler wanted to avoid a repeat of the Uruguay Round of GATT negotiations when stalemates in the agricultural sector had caused negotiations to drag out four years longer than planned. European manufacturing and services were angry at agriculture for the difficulties they faced in their negotiations because the structure of the CAP was a major obstacle to reaching a final agreement. Specifically, the EU,square plant containers with its trade-distorting price supports and production-based payments, was at the center of the controversy over how to structure the agricultural component of the GATT.

The European Commission and several member states concluded that entering the WTO negotiations with the CAP in violation of WTO rules once again would weaken the chances that EU representatives would be able to both defend the European Union’s vision for agricultural policy and also extract competitive agreements for services and manufacturing. In the run up to the Doha Round, European manufacturing and services sectors made it clear that they would not allow their bargaining position to be weakened or their interests threatened by European agriculture. These sectors signaled their intention to push aggressively for open markets “regardless of the price paid in terms of additional access to the EU agricultural market, which would presumably have to be borne by their fellow farmers” . In order to gain access to new markets, representatives for manufacturing and services stated their willingness to trade away core components of CAP policy. In addition, the European Commissioners for Trade, Competition, and Industry routinely challenged agriculture’s share of the EU budget and sought to diminish the prominence of the agriculture portfolio. Struggles and delays at the Doha Round caused by agriculture would provide additional ammunition to their efforts to siphon money from agriculture and into their own budgets. Given the clear signals sent by European manufacturing and services, Fischler wanted to enter the Doha Round with the ability to pursue and defend European agricultural interests without the sector being a stumbling block for progress towards Europe’s goals in other domains. The most important and fundamental way to position European agriculture for negotiation success was to ensure that CAP subsidies complied with existing WTO regulations. The WTO used a “subsidy stoplight28” system, containing green, amber, and blue boxes, to evaluate and classify member country subsidies. Permitted subsidies, meaning those that do not distort trade and do not include price supports, are in the green box. Examples of green box programs include decoupled subsidies and rural development supports. The amber box refers to all domestic subsidies that distort production and/or trade. Examples of amber box subsidies are production based subsidies and price supports. As subsidies in the amber box are considered trade and/or production distorting, they are subject to strict limitations, including an agreement to reduce them over time. In developed countries, only 5% of a country’s subsidies can fall into the amber box. Countries that exceed that limit must reduce their subsidies accordingly. The Uruguay Round agreement included a specific commitment by the 30 WTO members whose subsidies exceeded amber box limits to bring those subsidies in line with the 5% rule.

The last category is the blue box, which is also referred to as the “amber box with conditions”. It contains, “any support that would normally be in the amber box [which] also requires farmers to limit production” . It was developed as a way to help states move away from trade and production distorting amber box subsidies without causing too much hardship. Compliance in the agricultural sector was important because it meant that EU could press for market access for goods and services in emerging markets without being told that it first needed to get its agricultural policy in order. Keeping agriculture from hamstringing the pursuit of EU objectives for goods and services was also important for Fischler because it weakened the arguments often used by the EU Commissioners for Trade, Competition, and Industry to call for a reduction in the CAP budget. Speaking about his Doha Round strategy, Fischler noted, “we needed to change the conversation for the WTO. We couldn’t have a Uruguay Round repeat. We needed to be on the offensive. Decoupling was a good start because those types of subsidies [direct income support not linked to production] are already defined as in in the green box” . Fischler’s goal was to have the EU enter the round with its system of payments already in the “green box”. In order to do so, payments would have to be fully decoupled from production. Fischler felt that the EU would be better positioned in the negotiations if it came in with its agricultural subsidies already in compliance with WTO standards, rather than having to play catch up. Fischler was thus able to use the Doha Round to press the member states for more dramatic reform than they might have considered otherwise. Finally, Fischler knew that reform would be easier to pass if it occurred during an already scheduled CAP review, rather than in response to WTO negotiations . If reforms came during WTO negotiations, it would seem as though the CAP was caving into the demands of external actors. Fischler anticipated that the perception that non-EU actors were driving CAP reform would not play well with the public and would make reform even harder . Indeed, MacSharry’s approach to the 1992 reform was driven by this concern, as his reform overlapped with the GATT Uruguay Round. For this reason, MacSharry went to great lengths to present, explain, and justify his reform proposals as responses to internal EU needs and as improvements to CAP functionality rather than concessions to GATT officials, or, even worse, the United States.

Enlargement, like WTO negotiations, was placing pressure on the CAP. The accession of ten new member states,plastic pot manufacturers all poorer and less developed Central and East European countries, posed a serious threat to CAP spending. A CAP that remained coupled would be completely untenable under enlargement, when millions of new farmers would join the CAP. These new member states, where 26% of employment was in farming, were far more agrarian than the EU 15, which employed only 2-3% of the population in agriculture, and agriculture accounted for a much higher share of GDP . According to some estimates, the number of farmers in the EU would increase by 120% and the area of land under agricultural cultivation would increase by 42% after enlargement . The CAP would be responsible for providing income support to these farmers and rural development assistance for all agricultural land. Projections of the financial impact of enlargement suggested that, if the CAP remained unreformed, the budget would need to double. At the time of the MTR, the CAP was already the EU’s single largest program, consuming approximately 40% of the total EU budget. A doubling of CAP spending was political and financially unfeasible. At the time the member states agreed to the Agenda 2000 program, it was thought that the accession countries would not receive direct payments. The prevailing belief was that the new member states had no right to payments that were compensating current CAP farmers for price cuts they had been forced to accept in past reforms. The new member state farmers had not been part of the CAP at the time of these price cuts, and thus had no right to compensatory payments. In 2002, however, the Commission, anticipating that a two-tier CAP would be politically unsustainable, reversed course and decided that the accession states would be allowed to receive direct payments. The new member states would be allowed to access these payments gradually, not reaching payment levels commensurate to the existing EU-15 until 2013. Direct payments were to be phased in starting in 2004 from a base of 25% of the EU level upon accession and increasing by 5% per annum until 2007. Then, in 2008, the EU base payment would increase by 10% annually until 2013 at which point direct payments received by the new member states would be equal to the level of those received by the EU-15 . The graduated plan of access to the CAP bought EU reformers a small window of relief, but did not solve the fundamental problem of reconciling the existing CAP budget with the addition of ten new, largely agrarian, member states. Even though the new member states would not be integrated fully into the CAP payment system until 2013, Fischler needed to adopt change quickly because the new member states would be party to CAP negotiations upon formally joining the EU in 2004. Reform needed to happen before these new member states could enter and block changes that threatened to reduce the amount they received. The MTR was thus the last opportunity for reform before the new member states would be included in CAP negotiations. Enlargement’s threat to the budget gave Fischler a real, time-sensitive justification to push for massive and immediate changes in the operation of the CAP. These financial concerns allowed Fischler to construct a narrative that reform was not only desirable to improve the operation of the CAP, but necessary to save the CAP itself from total collapse. In addition, by arguing that decisions could be taken more easily now than after ten new member states joined the EU, he was able to make reform an immediate priority. Another problem facing the CAP was food safety. Consumer advocates were critical of the CAP in light of recent outbreaks of food-borne illnesses, and the apparent failure of the CAP to do anything to address or control them. Agenda 2000, the most recent CAP reform, did nothing to assuage these concerns, and on top of that inaction, new crises continued to emerge. In 1999, there was a dioxine crisis in Belgium and in 2001 an outbreak of foot and mouth disease in the UK . The UK’s second bovine spongiform encephalopathy crisis broke out in 1998 , concurrent with Agenda 2000 reform discussions. Logically, the BSE crisis in the UK should have compelled reformers to realize that existing environmental, animal welfare, and food safety standards were not sufficient. Making matters worse, new cases of BSE were detected in Belgium, France, Germany, Italy, and Spain. These crises also coincided with increasingly heated debates over the presence of GMOs in food for both human and livestock consumption .All of the member states with confirmed cases of BSE moved to quarantine areas near the infection and culled herds containing cows that tested positive. In France, officials also tripled funding for the study of BSE, ordered a review of slaughterhouse practices, banned the use of animal feed containing meat, and extended an import ban on British beef for a further three years beyond the EU-imposed ban.

Neither of those sources of water is subsidized to any significant degree

This highlights that the method used to define θfc in our study, while objective and tied strictly to soil moisture retention parameters, produced θfc estimates that are relatively conservative from a flow-based definition of θfc, as they are based on how a 1-cm slice of soil would drain. In a soil profile that has been deeply wetted, such as those used in this Ag-MAR modeling study, the defined θfc cannot be achieved by drainage alone within a reasonable time-frame, even at 10-cm depth in a 200-cm sandy loam profile . Thus, the corresponding time-to trafficability estimates should be interpreted as relatively conservative, especially for those soils with low plasticity indices such as sands and sandy loams. This is not to say, however, that the definitions used in this study are outside the norms of soil science. θfc is often defined with a standard tension . All textures but silt loam have estimated θfc values that correspond to this tension range . Finer-textured soils may still have some risk of compaction at the thresholds defined in this study, given their high plasticity indices and the relatively high Ksat estimates produced by the ROSETTA pedotransfer function for these textures . Similarly, while presence of a Bt horizon underlying various surface textures did not consistently delay time-to-trafficability, ROSETTA may overestimate the permeability of 2:1 clay enriched sub-soils occurring on, for example, stable river terraces above current floodplains,hydroponic container system especially in the eastern uplands of the San Joaquin Valley . Thus, these landscapes should be treated more cautiously if used for Ag-MAR during periods when trafficability is required, especially during low PET conditions.

For example, in an Australian study of Vertisol trafficability under irrigated cotton production, researchers concluded that risk-free trafficability only really existed at water contents near wilting point , which is equivalent to about 60% of the mean θfc for clays in our study . On the other hand, this contrasts sharply with a field study in the Netherlands which found that a heavy clay soil under pasture was trafficable at just 90 cm soil moisture tension based on observation of compaction patterns and tensiometer readings , which is moister than the wettest, commonly used tension-based definition of θfc . An additional uncertainty in trafficability and work ability research is the extent to which surficial trafficability and work ability moisture thresholds are sufficient to prevent detrimental subsoil compaction that requires more effort to ameliorate . Field validation studies that include modeling of soil moisture to predict suitable days for agricultural operations and that simultaneously examine full soil profile effects of wheel traffic occurring at or below these moisture thresholds have not yet been reported. A study of controlled traffic farming systems in California cotton production highlights this need, since bulk density increased to 25-cm depth while penetrometer resistance increased to at least 100-cm soil depth under wheel traffic in a sandy loam soil , but no operational decisions were guided by trafficability soil moisture thresholds in their study. Finally, the time-to-trafficability estimates are meant to guide operational decisions when crops are dormant or fields are fallow, given that root water uptake was intentionally neglected and only drainage and bare soil evaporation were considered in H1D simulations. For major perennial crops, end of dormancy typically ranges from mid February to late-April , spanning the time period addressed by this study. There are several reasons for omitting scenarios when root water uptake is active. First, Ag-MAR is recognized to be a risk to many actively growing crops due to the possibility of developing anoxic soil conditions . Second, for deep wetting events more generally, accurate root water uptake modeling requires knowledge of root depth distribution and crop canopy coverage. Third, the need for irrigation water may arise before the soil moisture trafficability threshold during active root water uptake for more sensitive crops or during specific periods of growth.

All of these considerations complicate the ability to provide a generalizable time-to-trafficability tool to growers that also accounts for crop root water uptake.A relationship between global warming and increased concentrations of greenhouse gases such as carbon dioxide , produced by the burning of fossil fuels, is suggested by much accumulating evidence. As far back as 1992, more than 150 governments attending the Rio Earth Summit signed the Framework Convention on Global Climate change. Article 2 states that the ”ultimate objective of this Convention … is to achieve … stabilization of greenhouse gas concentrations that would prevent dangerous anthropogenic interference with the climate system.” More than ten years later, the questions remain: how ”dangerous” are the consequences of anthropogenic interference, and how much ”stabilization” is justified? The economics literature so far has given mixed results with regards to the impact on agriculture.1 In the remainder of this section we give a brief overview of previous approaches to set the stage for our study. These can be divided into three broad categories, beginning with the agronomic approach, based on the use of agronomic models that simulate crop growth over the life cycle of the plant and measure the effect of changed climate conditions on crop yield and input requirements. For example, Adams relies on crop simulation models to derive the predicted change for both irrigated and rainfed wheat, corn, and soybeans. The predicted changes in yields are then combined with economic models of farm level crop choice, using linear or nonlinear programming.The analysis, however, usually considers variable but not fixed costs of production. It often turns out to be necessary to add artificial constraints to make the programming model solution replicate actual farmer behavior in the baseline period. Moreover, the analysis focuses on the agricultural sector, and ignores the linkages with the remainder of the economy which would make the input prices and input allocations to agriculture endogenous.

This is remedied in the computable general equilibriumapproach, which models agriculture in relation to the other major sectors of the economy and allows resources to move between sectors in response to economic incentives. An example is FARM, the eight-region CGE model of the world agricultural economy by the United State Department of Agriculture. However, while a CGE model has the advantages of making prices endogenous and accounting for inter-sectoral linkages, these come at the cost of quite drastic aggregation in which spatially and economically diverse sectors are characterized by a representative farm or firm. In summary, on the one hand the agronomic models do not fully capture the adaptation and mitigation strategies of farmers in the face of climate change, while on the other the CGE models are only appropriate to highly aggregated sectors of the economy. Mendelsohn, Nordhaus and Shaw provide an interesting middle ground, proposing what they call a Ricardian approach, essentially a hedonic model of farmland pricing, based on the notion that the value of a tract of land capitalizes the discounted value of all future profits or rents that can be derived from the land. The advantage of the hedonic approach is that it relies on the cross-sectional variation to identify the implicit choices of landowners regarding the allocation of their land among competing uses instead of directly modeling their decision. Further,planter pots drainage the hedonic function also allows one to calculate the direct impact on each farmer, county or state, in contrast to the highly aggregated structural CGE models. This is the approach we adopt, though with a number of innovations indicated below and explained in detail in succeeding sections. In this paper we resolve some of the differences in previous studies by estimating a hedonic equation for farmland value east of the 100th meridian, the boundary of the region in the United States where farming is possible without irrigation. The main contributions of the paper are: First, we incorporate climate differently than previous studies, by using transformations of the climatic variables suggested by the agronomic literature. The relationship between climatic variables and plant growth is highly nonlinear and our approach yields results that are consistent with the agronomic evidence. Second, we develop a new data set that integrates the spatial distribution of soil and climatic variables within a county with the help of a Landsat satellite scan of the contiguous United States. Third, we allow the error terms to be spatially correlated to obtain a more efficient estimator and correct t-values . Fourth, we present several sensitivity checks, and show that our results are robust to both different specifications and census years. We show that results remain similarly unchanged when we include state fixed effects to control for the influence of state-specific factors unrelated to climate, such as property taxes and crop subsidies. Finally, we evaluate potential impacts of warming using new climate projections from the most recent runs of two of the major global climate models. The paper is organized as follows. Section 2 outlines a model of farmland value with attention to issues raised by irrigation. Section 3 addresses spatial issues that arise in the definition and measurement of climatic and soil variables and in the correlation of error terms.

Section 4 presents our empirical results, including tests for spatial correlation and estimates of the hedonic regression coefficients and discusses a variety of tests of robustness of the results. Section 5 uses the results to generate estimates of regionally differentiated impacts of climate change on agriculture. Section 6 summarizes our conclusions. In this framework, climate variables play two different roles. Temperature is an exogenous shift variable in the production function; increases in temperature increase the demand for water as an input and they can raise or lower yield, depending on the size of the increase.Precipitation has a different role in irrigated areas than in dryland areas. In dryland areas, the water supply for crops comes from precipitation falling on the field before and during the growing season; in this case, the water supply is fixed by nature in any given year, and it comes with a price of zero. In irrigated areas, by contrast, the water supply is man-made, using local groundwater or surface water imported from somewhere else, it comes at a cost, and the quantity is endogenously determined. In terms of location, since the time of John Wesley Powell it has been common to take the 100th meridian as a rough approximation of the rainfall line in the US. To the east, rainfall generally exceeds 20 inches per year while, to the west, rainfall is generally less than 20 inches per year. Since virtually all traditional US crops require at least 20 inches of water to grow, the 100th meridian marks the boundary of the arid West, where farming is generally possible only with use of irrigation.3 Thus the 17 western states account for about 88% of the 150 million acre feet of irrigation water used annually in the U.S. The economic implications of the distinction between dryland and irrigated farming are discussed in detail by Cline , Darwin , and Schlenker et al. , and will be summarized briefly here. In addition to the fact that precipitation does not measure water supply in the arid West, the other distinctive feature is that, in irrigated areas, future changes in water costs, unlike other input costs, are not likely to be capitalized in future land prices in the same way as past cost changes were capitalized in past land values. Many of the major surface water supply projects in the western United States were developed by the US Bureau of Reclamation or the Army Corps of Engineers and involved a substantial subsidy to farmers. Depending on the age of the project, there is substantial variation in federal irrigation charges across different projects, and these are clearly capitalized into farmland values. Failure to account for subsidies could bias other regression coefficients, especially climatic coefficients that in turn are correlated with the access to irrigation. Aside from the federal projects, the remainder of the irrigation supply in the western states comes from groundwater or from non-federal surface water storage projects.Nevertheless, in the case of irrigation with non-federal surface water it still would be misleading to predict the economic cost of a change in precipitation on the basis of a hedonic regression of current farmland values.

The first consisted of measures primarily intended to drain and protect agricultural land

The reoccurring pattern of one invention creating new needs and opportunities that led to yet another invention offers important lessons for understanding the lack of development in other times and places. The key to explaining the progression of innovations in California was the close link between manufacturers and farmers that facilitated constant feedback between the two groups and the keen competition among producers that spurred inventive activity. Entrepreneurs seeking their fortunes were in close tune with their potential customers’ needs and vied with one another to perfect equipment that would satisfy those needs. Where these forces were not at work, the burdens of history severed the potential backward linkages that are so critical for economic development.Just as there were major investments in mechanical technologies to increase the productivity of labor, there were also substantial investments to increase the productivity of California’s land. These included agro-chemical research, biological learning concerning appropriate crops and cultural practices, and land clearing and preparation, but the most notable were investments in water control and provision. These took two related forms.In this realm, Californians literally re-shaped their landscape as individual farms leveled the fields and constructed thousands of miles of ditches. In addition, individual farms, reclamation districts,plastic pot manufacturers and the Army Corps of Engineers built several thousand miles of major levees to tame the state’s inland waterways. The second form consisted of a variety of measures to supply the state’s farms with irrigation water. Table 1 details the growth in the state’s irrigated acreage between 1890 and 1997.

Expansion occurred in two main waves: the first lasting from 1900 through the 1920s and the second, linked to the Central Valley Project, during the decade after World War II. Much of the historical growth of irrigation was the result of small-scale private initiatives rather than large-scale public projects that have attracted so much scholarly attention. Up until the 1960s, individuals and partnerships were the leading forms of organization supplying irrigation water. These forms accounted for roughly one-third of irrigated acres between 1910 and 1930, and over one-half by 1950. These small-scale irrigation efforts were closely associated with the rising use of groundwater in California over the first half of the twentieth century. Between 1902 and 1950, the acreage irrigated by groundwater sources increased more than thirty fold, whereas that watered by surface sources only tripled. Groundwater, which had supplied less than 10 percent of irrigated acreage in 1902, accounted for over 50 percent of the acreage by 1950. This great expansion was reflected in the growing stock of pumping equipment in the state. Underlying this growth were significant technological changes in pumping technology and declining power costs. During the 1910s and 1920s, the number of pumps, pumping plants, and pumped wells doubled each decade, rising from roughly 10,000 units in 1910 to just below 50,000 units in 1930. Pumping capacity increased two-and-one-half to three times per decade over this period. Expansion stalled during the Great Depression, but resumed in the 1940s with the number of pumps, plants, and wells rising to roughly 75,000 units by 1950. Individuals and partnerships dominated pumping, accounting for about 95 percent of total units and approximately 80 percent of capacity over the 1920-50 period.43 Since the 1950s, there has been a shift away from individuals and partnerships, as well as groundwater sources. By the 1970s, irrigation districts—public corporations run by local landowners and empowered to tax and issue bonds to purchase or construct, maintain, and operate irrigation works—had become the leading suppliers. The district organization rapidly rose in importance over two periods. In the first, lasting from 1910 to 1930, acreage supplied by irrigation districts increased from one in-fifteen to approximately one-in-three.

Much of this growth came at the expense of cooperative and commercial irrigation enterprises. Between 1930 and 1960, the district share changed little. During the 1960s, the district form experienced a second surge in growth, which was due in part to the rising importance of large-scale federal and state projects, which distributed water through these organizations. By 1969, irrigation districts supplied more than 55 percent of all irrigated acreage.Few issues have invoked more controversy in California than recurrent problems associated with agricultural labor. Steinbeck’s portrayal of the clash of cultures in The Grapes of Wrath represents the tip of a very large iceberg. The Chinese Exclusion Act, the Gentlemen’s Agreement aimed at Japanese immigrants, the repatriation of Mexicans during the Great Depression, the Great Cotton Strikes of 1933, 1938, and 1939, the Bracero Program of the 1940s, ‘50s, and ‘60s, the UFW and Teamsters organizing campaigns and national boycotts, the state’s Agricultural Relations Act, the legal controversy over the mechanization of the tomato harvest, and the current battles over illegal immigration are all part of a reoccurring pattern of turmoil deeply rooted in California’s agricultural labor market. There are few if any parallels in other northern states; clearly, the history of agricultural labor in California is very different. For all the controversy, however, the state’s farms have remained a beacon attracting large voluntary movements of workers seeking opportunity. Chinese, Japanese, Sikhs, Filipinos, Southern Europeans, Mexicans, Okies, and then Mexicans again have all taken a turn in California’s fields. Each group has its own story, but in the space allotted here we attempt to provide an aggregate perspective on some of the distinguishing characteristics of California’s volatile agricultural labor market. The essential characteristics of today’s labor market date back to the beginning of the American period. Table 2 offers a view of the role of hired labor in California compared to the nation as a whole. Expenditures on hired labor relative to farm production and sales have generally been two-to-three times higher in California than for the United States. Within California the trend shows some decline. Another important perspective is to assess the importance of agricultural employment in the economy’s total labor force. Here the evidence is somewhat surprising.Both agriculture and agricultural labor play a relatively prominent role in most renderings of the state’s history.

But as Table 2 indicates, until the last two decades, agricultural employment in California has generally been less important to the state than for the country. Clearly, it is the special nature of the state’s labor institutions,hydroponic container system not their overall importance in the economy, that warrants our attention. From the beginning of the American period, California farms have relied more extensively on hired labor than their counterparts in the East. At the same time Californians never developed the institutions of slavery or widespread share-cropping as did their counterparts in the South. The parade of migrants who have toiled in California’s fields has often been described as “cheap labor.” But this appellation is something of a misnomer, because the daily wage rate in California was typically substantially higher than in other regions of the United States, one of the world’s highest wage countries.In an important sense the “cheap labor” in California agriculture was among the dearest wage labor on the globe.In addition, one of the remarkable features of California agriculture is that the so-called “development” or “sectoral-productivity” gap—the ratio of income per worker in agriculture to income per worker outside agriculture—has traditionally been relatively narrow.This finding in part reflects the relatively high productivity of the state’s agricultural sector. It also reflects demographic factors. Due to low rates of natural increase, California’s farm sector never generated a large home-born surplus population putting downward pressure on rural living standards. Instead, the sector attracted migrants from the surplus populations of other impoverished regions of the world. For these migrant groups, agricultural labor was an entry point into a generally robust and dynamic economy.To a significant extent, past cohorts or their descendants, through hard work and high savings rates, have managed to advance up the occupational ladder.Over the long run of California’s history, agricultural labor has not been a dead end pursuit creating a permanent class of peasant laborers. This is an important point, because the agricultural history literature laments the end of the “agricultural ladder,” whereby workers start off as laborers or sharecroppers and work their way up to cash tenants and then owners of their own farms. According to the traditional literature, ending this process represents one of the great failings of nineteenth century American society.The literature is particularly critical of California because of its large farms and high ratio of hired workers to farm owners. But a little serious thought suggests how misguided these concerns are. Engel’s Law tells us that as income per capita grows, a smaller percentage of income will be spent on food. This suggests that in a growing economy the agricultural sector would diminish in size relative to the non-agricultural sector. At the same time the closing of the frontier meant that the total supply of agricultural land could not continue to grow as it did for most of the nineteenth century. Thus, unless farms were Balkanized into smaller and smaller units there was no possible way for the nineteenth century ideal to have continued. In California, although many members of immigrant groups succeeded to move up the rungs of the agricultural ladder, the focus on agriculture totally misses the key point.

The descendents of the past waves of Chinese, Japanese, Portuguese, Sikh, Italian, and Armenian laborers who now work outside of the agricultural sector are generally not anxious to give up their white and blue collar jobs to return to farming. Economic historians often explain the prevalence of the family farm in the northern United States by the working of the Domar model—if there is free land and a crop production technology offering little economies of scale and requiring little capital, then anyone can earn as much working for themselves as for anyone else.There will be no free hired labor, and if bound labor is illegal, no farm will be above a family’s scale. Like many simple abstract models, the implications of the Domar hypothesis are starker than the realities. But its fundamental logic is thought to explain many central features of the development of northern agriculture. California’s so-called “exceptionalism” also follows from the Domar model.In this state, production tended to involve larger scale and greater quantities of capital . In addition, due to the environment and the “initial” distribution of property rights, land was not free in California. Hence, the assumptions of the Domar model were violated. It proved possible for farmers to pay workers more than they could earn working for themselves and still earn a profit. From the mid-nineteenth century on, California was characterized by “factories in the fields” or “industrial agriculture” or, in more modern terms, “agribusiness.” But it is important to note that agriculture based on profit-oriented commodity production employing a substantial amount of hired labor was a widespread phenomenon in the period, and by no means limited to California. This organizational form was common to the agriculture of many capitalist countries in the late-nineteenth century, and it has arguably become increasingly common throughout the United States over the twentieth century. From a global historical perspective, the stereotypical mid-western commercially oriented family farm employing little or no hired labor is probably a greater exception than what prevailed in California.Today California farmers often complain about the high cost of labor relative to what their international competitors have to pay. But when the state first moved into the production of specialty crops, California producers of fruit and nuts faced labor costs several times higher than their competitors in the Mediterranean Basin. Given these conditions how did the early Californian producers not only survive, but in many cases actually drive European producers out of markets that were in their own backyards? For many crops such as wheat and cotton, California producers competed by relying more on mechanization to save labor, but that option was less available to orchardists. More fundamentally, the Hechsher-Ohlin model predicts that countries or regions should produce commodities that intensively use their abundant factors and sparingly use their scarce factors. Given this insight, why would the Californians even choose to try to produce labor-intensive crops?There is no doubt that California was a high-wage economy in the national, not to mention global, context. For example, in 1910, California farmers paid monthly agricultural laborers 71 percent more than did their counterparts nationally; day harvest labor was paid a 36 percent premium.