The disgrace of agricultural subsidies

C

Colin

Take the Federal Out of Farming

The disgrace of agricultural subsidiesSteve Chapman | October 25, 2007

Here's how the American free enterprise system works. You have an idea for a business. You find the money to start it up. You try to give customers something they want at a price low enough to keep them happy but high enough to earn a profit. Either your plan works, allowing you to make a living, or it doesn't, indicating you should find a different line of work.


Unless, of course, you are a farmer, in which case all this may sound unfamiliar. A lot of American agriculture operates in an environment where none of the usual rules apply—where the important thing is not catering to the consumer, but tapping the Treasury. It's a sector that, ever since the Great Depression, has been a ward of the government, both coddled and controlled.

By any reasonable standard, federal agriculture policy is past due for a major overhaul. But judging from the latest farm legislation moving through Congress, not much is going to change.

Back in the 1930s, when the economy was a wreck, the survival of capitalism was in doubt and Oklahoma was blowing away, you could understand the impulse for Washington to intervene on behalf of farmers. But the days when agriculture meant a lifetime of toil for a meager living are just a memory. Today, farmers monitor soil conditions by computer, drive air-conditioned tractors and have a higher average income than nonfarmers.

Yet many of them continue to enjoy treatment other industries can only dream about. Imagine the government rigging the market to assure high prices to people selling concrete or cameras. Dairy farmers and sugar growers get exactly that, courtesy of the Department of Agriculture. Farmers who plant a host of other crops receive compensation anytime their prices fall below a fixed minimum.

That's not the strangest part. These days, you don't have to grow anything at all to harvest federal crop subsidies. Instead, Washington will send you a check based on the amount of a product you raised in the past, even if you don't feel like growing it anymore.

Homeowners in one Texas subdivision found themselves getting federal money because their land was formerly used to cultivate rice. Some farmers pocket the payments they get for one commodity but plant something else, enabling them to earn two incomes for the price of one crop.

All this is sweet for the lucky few who happen to be holding buckets when the federal cash falls out of the sky. But someone has to foot the bill, and that someone is anyone who 1) eats or 2) pays taxes.

Government meddling raises the price of products at the grocery, while burning up billions of dollars in federal revenues. A study by Sallie James and Daniel Griswold of the Cato Institute, a free-market think tank, put the total cost of farm programs at $430 billion over the past decade.

Some farmers, and some urbanites, assume that agriculture would plunge into a death spiral if the government ever stopped furnishing all this help. In fact, the majority of people plowing fields would never miss it. In 2005, 85 percent of all federal payments went to just four crops—corn, wheat, cotton and rice. Two-thirds of all farmers are locked out of the largesse.


"For most commodities (such as fruits and vegetables, hay, meat products, ornamentals), there is little government involvement or income support," report economists Bruce Gardner of the University of Maryland and Daniel Sumner of the University of California at Davis. Not only that, but the commodities that get no help are just as profitable as those that do.

Yet Congress shows little interest in ridding us of this extravagant waste. President Bush proposed to trim costs and reduce payments to the richest growers, but the five-year farm bill approved by the House of Representatives in July omitted these modest reforms. A more ambitious bill to significantly reduce the federal role in agriculture, meanwhile, was cut down like a weed. The Senate is currently considering its own version, but the Agriculture Committee has indicated it's quite content with the status quo.

The American economy has undergone radical transformation in the last 75 years, and the majority of farmers have shown they can prosper outside a government-run hothouse. Yet our leaders seem to think that what was good enough for Ma and Pa Kettle is good enough for us.

Reason Magazine - Take the Federal Out of Farming

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Not only is the practice wasteful and unfair domestically; subsidies in the United States and other developed countries also create an unfair (borderline criminal in my view) international marketplace in which third world farmers cannot compete. Agriculture remains a massive part of national economies in Africa, Central America, South Asia and other areas of the developing world. Denying these farmers access to markets hurts the economic prosperity of these nations and their potential for development. The WTO estimates that if farm subsidies and barriers to agricultural trade were all eliminated, some billion and a half people across the globe would be lifted from poverty within a decade. Coupled with massive gains for those in poorer countries, consumers in rich countries would benefit from lower prices, greater selection and a more competitive marketplace.
 
D

Dr.Knuckles

A great post and something that is talked about every day by people talking about developed countries (the US is one of many nations who do this) but rarely talked about IN those countries.

I fully agree that these subsidies are wrong, almost criminal in some cases, but I also think that when they began they were necessary. I believe (and I realise I'm one of the few on this board who do) that essential services ought to be government run and controlled. Why? Because they are essential. When the Bush admin blocked Saudi firms from buying US ports... I think that was just common sense. Capitalism be damned. I wish Canada would show some of the same spine when we have Conservative governments. In the 40's and 50's food was an essential service... hard to think of anything MORE essential. However I think domestic food is no longer essential. We could live easily for decades off imported fod if we needed to. If US farmers cannot grow enogh food to feed US citizens... whoop-de-shit... South Americans, Africans and Asians would LOVE to provide some agricultural imports.

So while at the time I think the industry was so vital that it needed constant subsidy and government attention... that's certainly not the case now when it's cheaper for me to buy ginseng grown in Korea, harvested, shipped around the globe, and bought at Safeway than it is for me to pull over on the highway and buy some local ginseng from the Canadian who grew it.

Not that I'd know what the hell to do with ginseng. Same with BC oranges and California oranges. I live in BC but the Cali ones are cheaper. Why? Mexican labour vs. first year poli-sci student on summer vacation labour.
 
T

The_Bear

before there were price supports and / or price subsidies in teh US, there was chronic poverty.
In the 1920's, there was a huge depression in the price of wheat and corn. There had been depressions before, however, this one extended.....and extended......and extended even further.
Then came the subsides of the 1920's and the rise of the farm lobby. With the subsidies, the amount of money that was flowing into the farms increased, and they were able to provide more food at a lower cost, given even the subsidies.
The net result? The subsides provided a safety net for the farms. If the farms of a nation go out of business, there soon becomes far less food, of which any true nation is built on; a nation must be built on farms, or manufacturing, for it to truly be considered an independant nation with an indepedent economy.

I like the subsidies. I don't see any particular reason why the people who live in my country and that I can call my countrymen should not be helped, while people that I have absolutely no connection with, and will most likely never, should not.

Are they wasteful? Subsides, either through price supports or through direct cash investments, for the farms, are good for the economy of America. One thing that has always been something that we have exported has been food; we have been the worlds leading producer of corn, of wheat, and of other farm products. It is this 'hard currency' that we buy the other things we need; such as manufactured goods, other nations good will, etc.

bottom line: if farm output drops, if the prosperity of the farms drop, that dip will start feeding into the rest of the economy, because the economy of an independant nation is built upon either A) farms, or B) Manufacturing. If farms produce less corn, that's less food, less money, and less product for othe people in the economy to buy and sell.
 
J

jaqasia

I think you have to look at the whole big picture and sure the subsidies are wasteful and begs for reform, but consider the livelihood of all the people the farmers employ. Like the workers, the John Deere salesman, mechanics, there are alot of people involved in a farm.

So if the subsidies were just outright cut-off, yes the farmer in Africa might be able to sell more of his cotton, but what is that going to do for the economy of the town the farm is in, here in America?

Ruin American livelihood for the sake of farmers in other countries so you can pay a few cents less for a shirt or an apple?

I agree that in a perfect world we wouldnt have them, but there has to be a way to phase it out and get them off their corporate welfare without having such a ripple effect on alot of people.

Why should America give away everything to the foreign markets? Why shouldnt we protect our farmers, is there going to be a time where nothing is grown or made here anymore? Whats the point of that?
 
D

Dr.Knuckles

If you decide to keep the subsidies for the good of Americans then that's fine. God Bless. The problem is that the US has been brutally, ultra-violently active in hunting down and murdering South Americans who want to do the same in their own countries. Any South American government or potential government which even considered protecting their domestic markets form completely untethered US competition has been violently and relentlessly opposed. Death Squads, brutal right-wing regimes, invasions, CIA interventionsand assasinations... all of this has been over what the US has called Communism... the idea that a country might be able to subsidise domestic farmers or limit foreign imports that compete with their farmers.

So keep the developed countries ones and allow third world countries the same freedom, or prohibit both.. but the curent system is horibly injust.

The current system being the US and Europe hevily subsidise and protect agriculture, but if anyoe else does it it is Communism and there's gonna be a slaughter.

I'd recommend Niceragua to start. But El Salvadore, Panama, Cuba, Bolivia, Colombia.. they all make pretty stomache turning reading.
 
D

Dr.Knuckles

The most fucked up thing about my typing and spelling IS THAT I'M A PROFESSIONAL ENLGISH TEACHER!

I just type fast.
 
T

TenGig

Great article.

I've agreed with this idea for some time, but I do still have a few concerns.
-Should we become dependant on third world countries for food. It is essential, and we may not want to outsource it.
-How corrupt are governments in other countries? I wouldn't want to see all the rainforest in SA cut down for some cheap corn.
-Quality. This isn't too big of a concern since I believe it's an achievable goal, but it's still on my mind.
 
F

Freedom for All

Why should America give away everything to the foreign markets? Why shouldnt we protect our farmers, is there going to be a time where nothing is grown or made here anymore? Whats the point of that?
Because I don't see the need to pay higher prices for my groceries just to increase Archer Daniel Midlands profits.
 
T

TenGig

So if the subsidies were just outright cut-off, yes the farmer in Africa might be able to sell more of his cotton, but what is that going to do for the economy of the town the farm is in, here in America?
The money can come back to America directly or indirectly when those countries buy stuff from you, other markets will increase. Maybe the farmer can get a job at Microsoft. Well maybe not, but still, somewhere else.
 
C

Colin

The traditional and simplistic arguments of agriculture’s central role in the American economy are false. As of today agriculture roughly accounts for 0.9% of America’s GDP. Less than 1% (834,000 people as of 2004) of the US labor force is directly employed in agriculture. As the article points out: 1/3 of American farmers (involved in the production of corn, soybeans, rice, cotton etc - a minority in the sector and a tiny portion of the overall labor force) receive 85% of federal payments. Further the subsidies are imbalanced in that they are predominately directed towards large agribusinesses, annually creating America’s largest form of corporate welfare. What's striking is the degree of the imbalance - the top 10% producers/market actors received some 73% of all subsidies in 2001.

https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
Current Population Survey Home Page
Still at the Federal Trough: Farm Subsidies for the Rich and Famous Shattered Records in 2001

The notion that the economy of the United States relies heavily upon agriculture is highly unwarranted and almost completely false. The sector has been reduced to a minuscule aspect of the overall economy since the end of World War II. Further most American farmers can compete without subsidies (as the majority are currently excluded anyways); the real losers will be massive agribusinesses and inefficient actors who benefit from the current status quo. Over 1 billion (it’s probably significantly more) people worldwide are kept in poverty due to protective agricultural subsidies and quotas – all for the supposed benefit of a population which in the case of the United States is under half a million workers. Nationalism and protectionism to this degree is absurd and an utter insult to the welfare humanity.

Agriculture is one of the few areas in which developing countries can exercise their competitive advantage - Subsidies are artificially driving down the price of certain produce on world markets forcing developing countries into an almost colonial state of dependency on the agriculture industrial nations (some criminal/illegal cases of dumping have also occurred). Developing countries are denying them ability to compete fairly out of concern for isolated and increasingly irrelevant interest groups and corporations; this state of affairs is fundamentally unjust. These farmers along with competitive domestic agriculture can supply the United States with all the produce the market demands. Along with supplying the market, removing subsidies lowers the prices for consumers in the West while alleviating the misallocation of some 18 + billion dollars a year in taxpayer money.