9 Mar 2011

King of California -- The Review

In this book, Mark Arax and Rick Wartzman illustrate the fascinating details behind a family that combined hard work, farming wisdom and political maneuvering to turn "lake-bottom land" into a farming empire, with help from government workers who may have ignored the Public interest and badly-written and ill-enforced government laws.

The book (subtitle: "JG Boswell and the Making of a Secret American Empire") traces the story of the Boswell family, which left Georgia's cotton lands for California. The Boswell began marketing cotton in Los Angeles and then moved into production, turning land, abundant water, and very sharp management into one of the largest farming operations in the US and world. I won't summarize the fascinating, well-written story, but here are some notes I took on the way:
  • During a conflict over flows from the Kings river in the 1880s, Mr. Church raised his dam on the river, reducing water available to downriver farmers. This action -- more akin to "possession is ownership" than riparian rights or prior appropriation -- invoked a similar response: the farmers downstream blew up the dam and got "their" water. See this post on irrigation in the West 100 years ago, including how the government has to subsidize projects too risky and unprofitable for private companies.

  • Huge land grants from the Spanish and Mexican eras were mostly along the coast of California, not in the Central Valley. The Mexicans allocated huge tracts in the Valley just before California was annexed by the US in 1850. These tracts were reaffirmed by the US Land Commission for California. In 1871, 516 men owned 9 million acres of California land. Those who later abused the Reclamation Act of 1902 -- including Southern Pacific -- had lots of practice.

  • Miller & Lux, two German migrants based in San Francisco, owned 1.3 million acres in the Central and Santa Clara Valleys. Some of their land was irrigated by the San Joaquin River, but farmers upstream were taking enough water by prior appropriation ("first in time, first in right") to reduce flows next to M&L properties with riparian rights ("take what you want as long as you do not damage your neighbors"). In resulting disputes, California "found a way to blend both riparian and prior appropriation rights under a formula of `beneficial and reasonable' uses. What this meant on the ground was that the water generally went to those with the most creative lawyers and engineers." [p. 80]

  • The abuses of the Federal laws took place when individuals/families/corporations acquired multiple 80- or 160-acre parcels from programs dedicated to assisting small farmers and assembled them into illegally-large parcels. Abuses of water-related programs occurred when farmers with large farms took water that was supposed to go to small farms or paid subsidized prices for that water. Subsidies were (and still are) huge: Farmers only paid a portion of the cost of delivering water, without paying the capital costs of the projects that constructed them, the interest on those costs, and so on.

    The worst part of these abuses was not that the Federal Agencies (Bureau of Reclamation or US Army Corps of Engineers) willingly helped big farmers abuse and avoid the rules. It wasn't that politicians exempted abuses via special amendments in unrelated laws. It was that these very talented and rich farmers took the subsidized land and water instead of paying the market rate. That's like Bill Gates paying $0.85 for his $2.00 Big Mac.

    Of course, this kind of corruption, of the rich and powerful working with government to become more rich and powerful, has a long and infamous role in US policies, including the recent financial crisis that bailed out Wall Street and left taxpayers with the tab.

    So these were crony capitalists, not free marketeers. (There's one point in the book where Boswell says he "sent back" his cotton subsidy check. Yes, he did that once, but cashed the other ones.)

  • Harry Chandler (1864-1944) ran the Los Angeles Times for "what is good for real estate" [p. 214]. That's because he owned large tracts in the San Fernando Valley (his maneuvers to add water to them are portrayed in the movie Chinatown), Tejon Ranch, and other places. He was perhaps a central character in the story that I traced in my dissertation, and more directly in "The end of abundance: How water bureaucrats created and destroyed the southern California oasis"

  • In the late 1970s, the government looked set to break up Boswell's empire, based on its use of water reserved for 160 acre holdings. Boswell and Salyer (another big land holder) spent big money to "get access" to politicians and staffers, to present their views. In the end, they won an exemption from the limit, based on the idea that their private water rights were not affected by laws dictating that access to infrastructure and water was reserved for smallholders. Boswell et al. stayed in the business of collecting subsidies. (The weirdest case [p. 379] was when they got money for flood damage on land that they claimed was going to be used for wheat but were paid (in-kind) to not plant in wheat. When the government ran out of wheat for "payment in kind" for fallowed land, it bought wheat from Boswell's other operations, to give it to Boswell, who sold it again. Without any of these programs, the land would have been flooded. With them, Boswell's triple was worth millions of dollars.)

  • We know that big farms are good for individual farmers who can make more money from their management expertise. But small farms allow more people to make a living off of farming. Is that more productive? Maybe. Is it more profitable? Maybe (especially if subsidies are removed; they tend to go to bigger farms*).

    But are small farms better than big farms for the community? In a 1946 study that compared the company town of Arvin (dominated by the DiGiorgo family) to Dinuba, a similar-sized town in the area with many small farms, social scientist Walter Goldschmidt found Dinuba to be better in every way.** This result indicated that the logic behind the Reclamation Act was sound, even as it pointed out how Reclamation (and most other subsidy programs for farmers) had undermined the existence of towns like Dinuba.

    I'm not worried so much about reducing the number of people working in farming (currently less than one percent of workers) as much as the jobs those people have: 85 percent of them are hourly laborers making $8/hour. Why does that bother me? Because it's the result of government subsidies, not free market dynamics.

  • Arax and Wartzman ask an important question near the end of their book: big farmers like Boswell used federal subsidies to build huge farms on the bottom of a lake. They got rich and their crops were part of a vast system chasing yield. What were the costs? The Tulare Lake -- the largest lake west of the Mississippi -- was turned into farm land with troublesome runoff and little environmental value. Taxpayers sent huge checks to "welfare farmers." Their workers were more like wage slaves than farmers. Communities (as Lloyd Carter has documented) were weak and troubled.
I will soon post more on government failure in agricultural policy (Westlands).

Bottom Line: I give this book FIVE STARS as a fascinating history of a family that was good at farming and even better at working with bureaucrats and politicians to destroy the environment, local communities and small farmers for the sake of more subsidies, cheaper land, and free water.

* According to the USDA  [pdf], production and subsidies are shifting to larger farms that are run by wealthier people -- and that's only between 1989 and 2003!

** There is some debate over whether Goldschmidt was right to conclude that "similar" areas ended up having such big differences in farm size and quality of life. Hayes and Olmstead review them in this paper [pdf] with useful notes on the size of oil revenues and cost of water pumping on farm size and crop mix. They claim that small farms would pay almost double the cost of water in Arvin without considering shared pumping facilities. But even without such quibbled, they also agree that the larger farms -- however they got there -- were not contributing to community life. (In other words, Las Vegas differs from San Francisco for many reasons, but do you want government programs to encourage more cities like Las Vegas?)


Eric said...

If I ignore the 'big business is corrupt' trope, I seem to be able to reframe the story as:

1. Government regulators made rules that were very short sighted and then did not enforce these rules.
2. Private companies built large and profitable corporations based on the not well thought out government rules and the lack of enforcement of these rules.
3. If the government had put more thought into the rules and more effort into the enforcement, the Central Valley story would have been very different.

Is this a reasonable reframing?

The idea that American citizens should behave as if the government actually wrote decent rules and police themselves as if the government were enforcing these ideal but unwritten rules seems wrong.

David Zetland said...

@Eric -- Not really.

0) Big business is not corrupt, by definition (corruption is abuse of PUBLIC office for private gain).

1. The gov't rules were well thought-out (160 acres is 160 acres), but enforcement was lacking (BurRec wanted big farmers) and loopholes were added not not closed by corrupt politicians...

2. Companies built large corporations thru (a) hard work and (b) breaking the rules (akin to evading taxes and dumping toxic waste in playgrounds).

Anonymous said...

Great refresher on a good book. For another slice of 19th-century California agricultural history, you ought to read "Valley Empires", a new book about Henry Miller and Hugh Glenn. It's by Ann Scheuring and published by Gold Oak Press.

Mr. Kurtz said...

John Wesley Powell argued strenuously against the 160 acre limit being applied to much of the Western Slope. Such a small holding is simply unworkable in most cases. Americans have merrily ignored laws that are patently absurd (cannabis prohibition, 55 mph speed limit, etc.) for generations, and the more ridiculous provisions of a dumb law fit that mold.
About 20 years ago, Boswell sold their "Boston Ranch" (in Westlands), which I believe was the only portion of their holdings that was subject to the acreage limitation.
As it stands, those who wold like to dry up Westlands have an easy time painting the operators there (unfairly) as cold blooded corporate jerks. Imagine if the reclamation law had been strictly enforced, and the place were populated with thousands of tiny Ma & Pa Kettle types, whiny, entitled, broadly sympathetic! Our country's food production is too important to us and to the billions we help feed to allow it to become the province of a bunch of glorified gardeners.
The hospitality industry provides successful business models as diverse as Hilton and the Boonville Inn. In the same manner agricultural production can take many successful forms, depending on location and the desires of the owner. There are economies of scale, but they only go so far. Boswell is an anomaly; and they are still minute by comparison to most Russell 5000 companies. The business is also protean. If you look at a list of the 25 largest farm operators in California in 1978 (the last time things were booming), only Boswell remains; most of the others have gone out of business, sold out, or have shrunk dramatically.
A final thought for the "big-is bad" crowd: Most people thinking of an agricultural career today want vacations, benefits, a chance at promotion, a pension. The Ma & Pa operators offer none of this. Boswell, and employers like them, attract and retain the best and brightest. Better capitalized operators are also far better able to afford compliance with environmental and safety regulations.

David Zetland said...

@Mr Kurtz -- I agree with your comment on dumb laws and business scale, but Boswell (and many in WWD) are taking subsidies at the same time as they are at scale. I prefer that they do one or the other. (Obviously, repealing Reclamation is the best idea; no more subsidized irrigation.)

Boston Ranch was subject to the limit; Tulare lands were not, but only b/c of a last-minute (and ex post) exemption.

I agree with you and Powell; the trouble comes when Congress -- in its infinite wisdom -- decides that water's going to flow uphill, on the taxpayer's dime.

Oh, and I reckon that the Russell 5000 is the wrong reference -- the DJIA20 are just as politically connected (successfully manipulative) as the Boswells.

Wainstead said...

Funny, I just bought this myself!

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