Last updated on January 17, 2011
Last Saturday’s New York Times had a good editorial explaining why now would be a very good time to get rid of farm subsidies in the United States:
“The government spends $10 billion to $30 billion a year subsidizing mainly large-scale farmers. That includes: $5 billion in direct payments that are delivered regardless of what or even whether farmers plant; up to $7 billion in “marketing loans” that effectively set a floor on crop prices; up to $4 billion to protect farmers in bad years; about $4 billion in subsidies to buy crop insurance — which lead to higher premiums; and more.
This should be an easy one. But the farm lobby is not worried. Last week, the Farm Bureau Federation voted to insist that the 2012 farm bill “maintain a strong ‘safety net’ ” for farmers — including direct payments, insurance subsidies and the countercyclical and marketing loan programs. It said all the special pleadings should, of course, fit “within the budget framework.””
Those who know me well already know about my opposition to farm subsidies in the United States, Canada, Europe, and other rich countries.
My opposition to farm subsidies stems from the fact that for decades now, we have been encouraging developing countries to open themselves to international trade.
International trade theory is pretty clear about how countries should specialize in their comparative advantage in order to maximize their gains from trade. This means that countries should specialize in what they do best. No need for them to be the absolute best at it, they just need to specialize in what they do best. The comparative advantage of most developing countries is agriculture. By heavily subsidizing farmers in the United States, Canada, Europe, and other rich countries, we are undercutting farmers in developing countries.
On the one hand, we are encouraging developing countries to open themselves up to international trade. On the other hand, we are making sure that they do not get to benefit from doing so. If that is not talking from both sides of your mouth, I don’t know what is.
For what it’s worth, my view is that the US government should abandon farm subsidies and let the farms that survive specialize in what I think of as “luxury” agriculture (e.g., local and organic agricultural goods). In the end, American consumers — of which there are vastly many more than American farmers — would benefit by paying less for agricultural goods, unless they specifically choose to do so by consuming local and organic agricultural goods.
Given the political economy of most of the aforementioned rich countries, however, I doubt we will see an end to farm subsidies anytime soon. Farmers are very powerful given the weight given to rural constituencies. In many rich countries, rural communities are overrepresented in political institutions given the few people who inhabit them.
(H/T: Michael Pollan via Twitter)
Farm Subsidies: J’accuse!
Last updated on January 17, 2011
Last Saturday’s New York Times had a good editorial explaining why now would be a very good time to get rid of farm subsidies in the United States:
“The government spends $10 billion to $30 billion a year subsidizing mainly large-scale farmers. That includes: $5 billion in direct payments that are delivered regardless of what or even whether farmers plant; up to $7 billion in “marketing loans” that effectively set a floor on crop prices; up to $4 billion to protect farmers in bad years; about $4 billion in subsidies to buy crop insurance — which lead to higher premiums; and more.
This should be an easy one. But the farm lobby is not worried. Last week, the Farm Bureau Federation voted to insist that the 2012 farm bill “maintain a strong ‘safety net’ ” for farmers — including direct payments, insurance subsidies and the countercyclical and marketing loan programs. It said all the special pleadings should, of course, fit “within the budget framework.””
Those who know me well already know about my opposition to farm subsidies in the United States, Canada, Europe, and other rich countries.
My opposition to farm subsidies stems from the fact that for decades now, we have been encouraging developing countries to open themselves to international trade.
International trade theory is pretty clear about how countries should specialize in their comparative advantage in order to maximize their gains from trade. This means that countries should specialize in what they do best. No need for them to be the absolute best at it, they just need to specialize in what they do best. The comparative advantage of most developing countries is agriculture. By heavily subsidizing farmers in the United States, Canada, Europe, and other rich countries, we are undercutting farmers in developing countries.
On the one hand, we are encouraging developing countries to open themselves up to international trade. On the other hand, we are making sure that they do not get to benefit from doing so. If that is not talking from both sides of your mouth, I don’t know what is.
For what it’s worth, my view is that the US government should abandon farm subsidies and let the farms that survive specialize in what I think of as “luxury” agriculture (e.g., local and organic agricultural goods). In the end, American consumers — of which there are vastly many more than American farmers — would benefit by paying less for agricultural goods, unless they specifically choose to do so by consuming local and organic agricultural goods.
Given the political economy of most of the aforementioned rich countries, however, I doubt we will see an end to farm subsidies anytime soon. Farmers are very powerful given the weight given to rural constituencies. In many rich countries, rural communities are overrepresented in political institutions given the few people who inhabit them.
(H/T: Michael Pollan via Twitter)
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Published in Agriculture, Commentary, Development, Food and Policy