Is business failure a sign of market failure?

By: Jeremy Lomman


I recently joined the Global Food Studies program at the University of Adelaide.

We have only scratched the surface on the mountain of economic data and reports to be analysed about the global agribusiness and food industry.

One thing that is already glaringly obvious is the increasing challenge of managing the relationship between the agribusiness and food industry and Government.

The economic rationale for Government intervention in the agribusiness and food industry is very complex, especially now that food trade is almost completely liberalised, globalised and monopolised.

Long story short, most often the best financial outcome for all participants in the food chain is for Governments to simply get out of the way.

Competitive markets will create the most efficient food system. For this to happen markets need to be imperfect, because no one makes any money in markets that are perfectly competitive.

Imperfection means that some businesses will always fail or be absorbed. The fact that businesses fail is not evidence of market failure, requiring Government intervention.

There is a tendency for the agribusiness and food industry to ask for Government intervention to address the symptoms of imperfection.

Should this be the Government’s role? Will it improve the situation?

Leverage is a pre-condition for improving food systems, because it recognises the interrelationships that exist along the food chain.

A leveraged industry is well-capitalised. A well-capitalised industry is capable, productive and profitable.

This shifts the Government’s role to pulling the right economic levers locally, that improve the overall ‘investment setting’ of the agribusiness and food industry.

In today’s world of global business, it is important that individual participants of the agribusiness and food industry work towards improving their position, by understanding the global economic forces now impacting their business.

This is a key area of economic development for regional business in Australia. We need to know what to ask Governments to do. And to be clear on what we don’t want them to do.

Better understanding will help reset some old paradigms about the conversation we need to have with Government, in turn helping Government improve the application of its role.

We can turn our attention to effective policy, rather than the symptoms of being in business.

For what it’s worth, the entire world is currently grappling with this issue.

That just means more reading for me.



Jeremy Lomman is a hybrid marketer and product strategist specialising in regional business, agribusiness and food.  In 2011 he    launched SOS Interim Management, Australia’s first interim management business dedicated to agribusiness and food industry development and export.  Contact: 0417567148.



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