Last updated on November 14, 2011
So says the Center for Global Development’s (CGD) Kimberly Ann Elliott in a recent post:
As a start, CGD colleague Connie Veillette and John Norris from the Center for American Progress identified five ways to “make aid more effective and save more than $2 billion.” Three of their five recommendations involve cuts in subsidies for farmers, shippers, and NGOs that would make US food aid policies more flexible, responsive, and development-friendly… and save a half billion dollars. In addition, Connie and John recommended cutting at least $1.5 billion from farm subsidies, which go disproportionately to larger, richer producers.
Increasingly in the congressional debate, the $5 billion in “direct payments” that go to farmers every year — regardless of crop prices or yields, and on top of any other subsidies they receive — have moved squarely into the budget-cutting bulls eye. Eliminating those payments, which were created almost two decades ago as part of a failed effort to reform farm subsidies, is certainly justified, but those payments are delinked from production and cutting them would do little to reduce the global distortions imposed on developing-country producers. There is also another $10-12 billion in trade-distorting subsidies that undermine incentives to invest in agriculture in developing countries – those should not escape the budget ax.
I have addressed this topic many times on this blog in order to make the exact same point Connie Veillette and John Norris make. In chronological order:
- Farm Subsidies: J’accuse!
- Spending Cuts and Farm Subsidies
- Foreign Aid and Farm Subsidies: Why Fund Both?
- Farm Subsidies: “Plus ça change…”
In short, as I was writing in October:
There really is no reason why we should keep subsidizing agriculture in this country. For over a half century, we have been encouraging developing countries to open themselves up to international trade. But for international trade to make sense for a country, that country must be able to tap into its comparative advantage — what it does best. For most developing countries, what they do best is agriculture.
By subsidizing our own farms, we are systematically screwing over agricultural producers in developing countries, for whom the marginal value of one dollar of income is probably much higher than the marginal value of the same dollar of income for someone in the Midwest.
This is what happens under regulatory capture when the interests of a large group of people spread out diffusely across all electoral districts (in this case, taxpayers) are offset by the interests of a smaller, more organized group (in this case, farmers) whose members are concentrated in certain electoral districts.