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Friday, February 11, 2005

 

agricultural subsidies


american farmers have been alarmed at the bush budget allocation for agricultural subsidies, which represents a 5% cut this year and reductions of a third over the next ten years.

this is something of a shock, as the economist noted:

In the surprising category is farming: the president proposes cutting the Agriculture Department’s spending by $2 billion, or 9.6%. Much of this reduction would come by capping subsidies (much of which go to big farms) at $250,000 per farm. This will infuriate communities in the farming states of the south, mid-west and west, most of which have up until now been firm supporters of Mr Bush.
the united states is no longer an agrarian nation, but these subsidies have come to represent two things. first, a redistribution of funds to politically-powerful agribusiness; and second, assistance for the oft-romanticized small farmers.

the former is a typical method of rewarding political backers and currying future favor, and what can be said about it has already been said everywhere else. but the latter is often assumed to be a virtuous cause, as visions of puritan families in the heartland rouse strong emotions of the american mythology.

but it is not virtuous. such subsidies keep many small farmers in business, instead of being bought out by more successful and efficient farms or simply shuttered. the resulting glut of production capacity undermines commodity prices, pushing yet more small farmers to the brink. much of this inefficient production should be allowed to end, allowing prices to rise naturally and reducing the need of subsidy.

subsidies can also be capricious. one of the greatest strikes against small farmers was instigated by president reagan's 1981 farm bill when he dramatically increased support for small farmers. being suddenly flush with cash from price supports, many small farms invested in expansion, often unwisely. when overproduction took hold, these farmers were caught out overextended as markets tanked and were crushed throughout 1983-5, with thousands going into bankruptcy and foreclosure. farm aid and scarecrow resulted.

but, perhaps most profoundly, government farm policy make american commodities competitive with third-world agricultural output that would, in a free market, undercut western producers and give poor nations the much-needed area of comparative advantage that could improve the impoverished conditions of their societies. titanic agricultural subsidies and strict tariffs in the developed world may be the single greatest global impediment to progress in eliminating poverty and starvation. they are the source of a great deal of third-world concern and complaint, destabilizing trade talks, and the poor nations have been validated powerfully by the wto in their claims.

saddest of all, i'm certain the bush administration has taken no great step here -- the ag lobby is incredibly strong in congress, and the bush budget was constructed with that knowledge. even under such fiscal duress as we endure today, subsidies will probably not be allowed to lapse.

railing against farm subsidies is at least as old as h.l. mencken. add me to the litany.


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