After two days of provocative papers and lively discourse, the participants in this Consortium conference have succeeded in challenging the need for, and the nature of, agricultural marketing policy in the future. Rather than cite the explicit messages of individual papers in this response, I will discuss several themes that arose from the discourse among the participants. Most of these themes were not resolved during this conference, but remain as open topics for "scientific conversation".
There are four drivers of change in agri-food markets that create the need for new marketing policy. They are (1) loss of national sovereignty, (2) rise of consumer sovereignty, (3) industrialization of agricultural production and marketing, and (4) changes in government philosophy and budget envelopes. National sovereignty is lost as NAFTA and GATT cause new supernational management structures and constraints to exist that limit the scope and effectiveness of national policy interventions. Consumers are motivated to demand increasingly specific products and they have information technology which supports their ability to seek, identify, and procure these products. This limits the scope of commodity-based marketing policies to serve markets for "designer goods". Likewise, this trend limits the relevance of commodity-based price reporting systems and commodity-based economic analysis. Industrialization appears to be the euphemism of choice to describe vertical coordination systems that internalize former market transactions by inter-firm alliances and, also, to describe the inexorable trend towards increased scale at many points along the production-marketing chain. Coordination may be contractual, ownership-integration, or the result of new organizational forms that are captured under the rubric of strategic alliances. The final trend is the revealed policy preference that exists in Washington, Ottawa, and other capitols. Declining budgets for market intervention are exacerbated by anti-intervention sentiments in the philosophy of sitting governments.
It has become apparent during this conference that these drivers of change must cause a re-evaluation of the nature and extent of public intervention in markets. Notwithstanding the broad implications, it is equally apparent that public interest still exists in the protection of the integrity of agri-food markets for the benefit of producers and consumers. This point will be revisited under theme 3 below.
Among the four drivers of change listed above, three are accepted with various degrees of equanimity, resignation, and enthusiasm. The fourth, the trend towards industrialization of the agri-food sector, is received more negatively. One source of disquiet is that industrialization means that traditional market institutions, processes, and comfortable icons are mutating and disappearing. Market prices are the quintessential example. As more transactions occur within intra-firm structures, traditional market prices are losing relevance. A common theme in this conference and in past conferences of the National Food and Agricultural Marketing Consortium is that this is a threat to producer sovereignty, producer welfare, and to public interest in food markets. Without the transparence of publicly reported prices from active markets between atomistic producers and marketers, how can one measure the efficacy of the sector and the welfare of its participants?
The participants in the conference have opened debate on the question by posing a counter-question: Is there really a difference between agri-food and other sectors? This is a fundamental question for marketing policy analysts and decision- makers. If the answer is no, then the public interest in the efficacy and welfare transfers in agri-food should conform to that of other "already-industrialized" sectors, where the vast majority of transactions are hierarchical, to use Williamson's lexicon. The extent of public interest in transactions internal to vertically integrated consumer goods industries is very limited. Do we have published price series and published demand elasticities for the components used in stereos, finished clothing, and compact discs? If the answer is yes to the question, then we must find out how to accommodate the consequences of industrialization in our information-reporting and analyses.
As an aside to this theme, two propositions about the origin of industrialization have been made. (1) Industrialization is market-driven. That is, the industrial organization of global markets has promoted the development of horizontal scale- increasing mergers and alliances. (2) Industrialization is consumer-driven. That is, to better serve the segmentation of domestic and global markets, vertical coordination structures are necessary to transmit consumer preferences upstream to the farm and to farm input suppliers. Regardless of whether one or both of these propositions is valid, it is important to remember that this trend is endogenous to the marketing system. If marketing policy analysts are uncomfortable with this trend or cannot cope with it, then we need new tools in the analytic toolbox, not intervention to redress it. If industrialization means we cannot have confidence in demand and supply elasticities at (blurred) transaction points in the vertical market, then perhaps the estimation of those elasticities should be abandoned in favor of other value-based analyses.
There are (apparently) two types of government policies: intervention and facilitation. The received wisdom for the past two days is that the former is bad and the latter is good. This is far too facile. My work with the resource-based model of organization strategy suggests that what may appear to be laudable market facilitation by a third party (i.e. the government) may be a rent-reducing intervention. For example, a group of enterprises which have jointly developed an alliance to serve a particular overseas market for a high value-added food product may find their market position eroded by the investment of public monies to "open" that same market for other firms who will not make the same investment privately. The rent-earning human and organizational capital that was invested by the alliance may have zero salvage value after this intervention. Similar arguments can be made about quality standards and many forms of market information; public investments in these "facilitating mechanisms" may dissipate the rent-earning capacity of private investments already in place,
If competitiveness in global markets is now of paramount importance because of the loss of national sovereignty and the globalization of agri-food markets, then marketing research and marketing policy are, respectively, competitiveness research and competitiveness policy. If this is so, then there is a huge problem that faces us. There is no coherent conceptual, methodological, and policy approach to competitiveness to replace the current ad hoc approaches. We don't even have a definition of competitiveness that is universally accepted. See the proceedings of the 1992 International Agricultural Trade Research Consortium for a bewildering list of definitions and rationalizations.
It is a challenge to this Consortium to take the lead on finding common ground for the researchers, analysts, and government regulators who comprise the group. This is the obvious forum for such discourse.
Several participants note that there is a dichotomy that exists between undergraduate and graduate education in marketing. Undergraduates learn the B-School marketing management approach and, often, the institutions of agricultural markets. Graduate students get neoclassical economic theory and such derivatives as search theory and game theory. Some study industrial organization economics, which is becoming dominated by the latter. This dichotomy stresses diminished teaching resources and causes conflicts in the rite of passage between undergraduate and graduate education.
We are well past the point of needing to discuss this. We must decide what we will do about it. Either both views are useful and that modern analysis of markets requires a pluralistic approach, or we are wasting valuable resources teaching one of these. If graduate education in agricultural marketing cannot be informed by the tools and concepts of marketing management, then it is heading for extinction. If the American Marketing Association has an order of magnitude more members that the AAEA, can it be that what they are teaching in graduate marketing has no value, even to agricultural economists? Likewise, one must argue that economic theory is a useful tool in marketing management. They use (often simplistic) market models, game theory, and other tools that are familiar to agricultural economists. We should require a sound foundation in economics for undergraduates. We should seek to exploit the tools of "industrialized" marketing in our research, particularly if we are in agreement about theme 1.
In sum, I believe that several important themes were presented for initial discussion here. The conversation has only begun. I am intrigued to follow the discussions further in this forum and in other professional fora. Are we truly "closet Schumpeterians", as has been suggested during the conference, and ready to trace the disequilibrium path of agricultural marketing and policy over the next decade?