Deformación post-Laramide (Paleoceno tardío-Reciente)

Section 3.1 hypothesised that non-major party formation and electoral support is a function of two inputs: (1) voter dissatisfaction with major parties and (2) an economic issue whose salience to voters attains crisis proportions. Section 3.2.2 defined rural voter dissatisfaction with major parties in terms of the response of producers’ incomes to changes in commodity price. It implicitly identified the level of commodity price as the economic issue which engenders agrarian party formation and electoral support. This section specifies the conditions under which the salience of the level of commodity price to rural voters attains crisis proportions.

Figure 3-7 demonstrated that a commodity producer’s profit or loss is equal (at the equilibrium level of output) to the numeric difference between commodity price and the average total (unit) cost of produc­ tion. If commodity price is greater than the unit cost of production, a short-term profit obtains; if unit cost exceeds price, a short-term loss is incurred. Figure 3-8 extends and elaborates this analysis. It indicates that, given certain adverse price conditions, the producer loses less by continuing production than by ceasing production. Specifically, as long as total revenue exceeds total variable cost (as distinguished from total fixed cost) at the equilibrium level of output, losses are minimised by continuing production (Ferguson and Gould, 1975p.234).

At price Pj, for example, short-term equilibrium obtains at B, which corresponds to qj units of output. Here, the producer loses AB dollars per unit of output; nonetheless, average variable costs of production are met — indeed, because the average variable cost of variable inputs is q 2C dollars per unit, and the price of output is qjB dollars per unit, an excess of BC dollars per unit emerges from production. This excess can be applied to fixed costs. As a result, not all of the fixed costs (qjC) are lost, as would result if production were halted. The total loss sustained is therefore smaller than that associated with nil output. At price p2, however, average variable exceeds marginal revenue. Here, producers lose not only fixed costs: they also lose EF dollars per unit in variable cost. Thus, when commodity price falls below the average variable cost of commodity production, short-term equilibrium output is nil (i.e., income- maximising commodity producers cease production).

Producers must either subsist on past earnings or transfer resources out of agriculture when agricultural commodity prices decline below the average variable cost of production. It is thus under these cir­ cumstances that the political salience of agricultural commodity prices attains crisis proportions: it is under these circumstances, in other words,, that rural economic dissatisfaction, rural voter dissatisfaction with major parties - and hence agrarian party formation and electoral support -- occurs.

Figure 3-9 plots Australian and Canadian price indices for the commodities hypothesised in section 3.2.2 to be associated most closely with agrarian party formation and electoral support.20 It indicates that the price of agricultural commodities was most likely to decline below the average variable cost of production (and therefore that the price of price-inelastic commodities was most likely to be a salient political issue) in the years immediately after the First World War. Between 1919 and 1921, the price index of Canadian wheat declined 65.82 percent (from 3485 to 1191); between 1920 and 1922, the price index of Australian meat declined 45.50 percent (from 3279 to 1787) and that of Australian wheat fell 28.02 percent (from 2480 to 1758). The price of these commodities fell more precipitously in these years than during the depths of the Great Depression. Between 1929 and 1931, the price index of Canadian wheat fell 63.80 percent (from 1544 to 559); that of Australian meat fell by 32.86 percent (from 2246 to 1508) and that of Australian wheat fell by 20.80 percent (from 1803 to 1428). This study therefore

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Figure 3-8: Commodity Price and the Average Variable Cost of Production

G.

o

Q

U

A

N

T

IT

Y

Figure 3-9: Australian and Canadian

Price Indices, Wheat and Meat, 1910-1940

--- Wheat (Cariada) --- Wheat ( A u s t r a l i a ) ---Heat ( A u s t r a l i a ) 3000 1910 1915 1925 Year 1930 1935 1940

Source: Australia (1920-1940); Canada (1920-1940).

hypothesises that agricultural commodity prices declined below the average variable cost of production (and therefore that conditions were conducive to agrarian party formation and electoral support) during these years.

Hypotheses

The hypotheses set out in section 3.1 may, following the analyses undertaken in section 3.2, be more precisely specified:

• The simultaneous appearance of a decrease in producer income in response to a decrease in commodity price and a decrease in commodity price below the average variable cost of production causes agrarian party formation and agrarian party electoral support.

• The agrarian party is an economic entity: non-economic variables, such as religious and occupational variables, are unrelated to agrarian party formation and agrarian party electoral support.

• Following equations (3.22) and (3.23) and Figure 3-2, a subsequent recovery of commodity price above the average variable cost of production, together with the continued presence of rural voter dissatisfaction with major parties, reduces (but does not eliminate) the number of constituencies with an agrarian party candidate and the agrarian party’s percentage share of the total vote.

• Following equations (3.24) and (3.25) and Figure 3-3, a subsequent recovery of commodity price above the average variable cost of production, together with the disappearance of rural voter dissatisfaction with major parties, causes agrarian party dissolution.

3.3. Summary

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"Instrumentalist" theories are judged according to the extent to which they satisfy the purpose(s) for which they are designed and whether they perform better than alternate theories (see Appendix C). "All theories, by their very' nature, are no more than approximations of the phenomena under consideration; being approximations, they are obviously false in some absolute sense. The relevant question, however, addresses the extent to which [a theory] is a good enough approximation to be useful for the purpose for which it was designed" (Davis, 1969p.31); (Friedman, 1953). The theory which was formulated in this chapter attempts to account for the formation, in the years immediately following the First World War, of agrarian parties in Australia, Canada and New Zealand; the rapid dissolution, in these years, of the Canadian Progressive Party and the New Zealand Country Party; and the continued presence, to this day (although with a different name) of the Australian Country Party. This theory attempts, in other words, to resolve the problem for research formulated in Chapter 1.

For this purpose, this theory is more suitable than the interpretations assessed in Chapter 2. It specifies the timing of agrarian party formation and source of agrarian party electoral support and dissolution in greater detail than competing interpretations. Most importantly, by hypothesising that agrarian party formation, electoral support and dissolution is a logical consequence of rational behaviour in political and economic markets, it possesses what, according to Davis, is "the first essential for every useful theory. It is capable of being [empirically] contradicted. Not all theories have this attribute" (Davis, 1969p.23).

Chapter 4 describes the research techniques and data which are required in order to corroborate this theory’s propositions.

Chapter 4